Kroger`s Cloud Strategy: From Retailer to Technology Company?
| Case Code: ITSY122
Case Length: 16 Pages
Pub Date: 2021
Teaching Note: Available
| Price: Rs.400
Organization: The Kroger Company
Countries: United States
Themes: Technology Strategy, Cloud-based Software, RetailTech,Innovation
Abstract Case Intro 1 Case Intro 2 Excerpts
The Start of The Cloud Journey
In 2007, Kroger began its cloud journey when it integrated VMware into the organization. More than 90% of the company’s IT infrastructure was virtualized across more than 45,000 VMs . In 2013, the retailer integrated vCloud Director and vCenter Orchestrator . It relied on VMware’s infrastructure platforms, such as NSX-T Data Center..
Evolution of Kroger’s Cloud – Google and Microsoft
In 2017, Kroger adopted the GCP that was expected to support the Kroger Restock Plan. Furthermore, the company’s tech lab, KTD, was expected to deliver new technology-based innovations using GCP. Hjelm said, “The adoption of Google Cloud Platform signals our commitment to positioning Kroger as an industry leader for digital programs such as ship-to-home and home delivery.” ..
Kroger – Developing Its Own Retail Tech
At the end of 2018, Kroger introduced a new handheld wireless technology called the Scan, Bag, Go (SBG) at 400 of its stores. Its in-house research and development team – KTD – invented and built the SBG. Customers could scan items that they intended to purchase from the shelf using a handheld device provided by the retailer. The devices were placed in conveniently located kiosks inside the front door. To activate the device, customers needed to scan their Kroger Plus Shopper’s Card or punch the ID from the card manually..
Migration of Customer-Facing Search Engine to GCP
Kroger observed that an increasing percentage of shoppers were making purchases online rather than at physical stores. It had digital revenues of US$ 5 billion in 2018 and that was expected to go up to US$ 9 billion in 2019. The retailer believed that to keep up the momentum of digital revenues, its search engine had to constantly evolve and improve..
Kroger-Microsoft: Developing RAAS (Retail as a Service)
Kroger observed that customers were increasingly seeking the benefits of both a digital and physical shopping experience, and that companies that combined the two experiences were succeeding. So, in 2019, it partnered with Microsoft to modernize shopping by combining the online and brick and mortar shopping experiences. In that endeavor, technology and data-driven insights were expected to be utilized for providing a smooth and personalized experience to shoppers..
The Road Ahead
As of 2020, Kroger’s digital sales had doubled to more than US$ 10 billion, within two years and by the end of 2023, they were forecast to be double of that. (See Exhibit IV for List of the Top E-Commerce Companies in the US). Speaking about the strong growth prospects of the company’s digital business, McMullen said, “Digital is a significant growth opportunity. By digital, we mean the Kroger seamless ecosystem we’ve built over the past few years to be able to deliver anything, anytime, anywhere regardless of channel, whether pickup, delivery or shipped. Today, we are seeing more and more new customers engaging in our seamless ecosystem…. We will continue to build on this momentum.” ..
Exhibit I: Kroger’s 5-Year Financial Performance (in billions of US$)
Exhibit II: Latest Retail Technologies and Startups Providing Them, As of 2017
Exhibit III: Information on Technologies
Exhibit IV: List of the Top E-Commerce Companies in the US, 2020 (in billions)
Exhibit V: US Grocery Market Share, 2020
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