- The Kroger Co. is planning to invest hundreds of millions of dollars to change the way it uses space at about one-quarter of its nearly 2,800 stores, which adds up to about 700 different locations in 35 states and the District of Columbia. The retail giant will also switch up the product selections 20% to 30% of those stories carry, according to the Cincinnati Business Courier.
- The remodeling and other changes are part of the three-year "Restock Kroger" plan the company unveiled during an investor conference held Oct. 11. Kroger will spend $3.045 billion on the plan, according to CFO Mike Schlotman, which the company indicated would be paid for by capital investments, cost savings and free cash flow.
- Decisions will be tailor-made for each individual store, Stuart Aitken, CEO of Kroger’s 84.51º data analysis unit, told the business website. He added that analytics will be used to make these decisions. “We will take our segmentation to another level, an individual store level, and the stores will be right for the communities they serve,” he told the Courier. “We’re going to right-size categories. I’m sure many of you have walked [into] stores and said, ‘Why is this category so big?’ We will correct that in the store. We’ll have the right prepared foods for customers.”
The goal of this plan, according to Kroger executives who spoke during the investor conference, is to localize and personalize product selections for shoppers across the country. The nation’s largest grocer wants to feel very small to its customers.
In his interview with the Cincinnati Business Courier, Aitken noted that data analytics can help the process of determining what shoppers want to see in their neighborhood Kroger outlet. “If we see a particular store has a high pet density, why not create a destination around pets for that particular store?” he said. “Beverage is on fire. Let’s make sure we have the space for it. Let’s implement our fresh food elements.”
Another company goal is to differentiate itself from its competitors. Kroger is determined to continue outmaneuvering Whole Foods, which had been known for its diverse selection of local brands. Last week, Kroger held its first natural food innovation summit, which brought together some of the types of products that used to drive shopping trips to Whole Foods. It was good timing for Kroger, since the natural and organic retailer recently announced it will further centralize its buying operations — which many say will result in fewer of the niche brands that have given Whole Foods its unique identity in the marketplace.
Kroger also has been working to update its stores. A 60-year-old store in Indianapolis that customers called "Ghetto Kroger" received a $1.3 million facelift, which added healthy options and placed fresh fruit and produce items in the front of the store.
These types of investments will benefit Kroger by focusing on customers in today's rapidly shifting marketplace, according to company chairman and CEO Rodney McMullen. "We have the scale, the data, physical assets and human connection to win. Combining our food expertise and data analytics uniquely positions Kroger to create new and highly relevant customer experiences, delivered both digitally and in stores. Restock Kroger builds on our strengths and strategically repositions Kroger to accelerate our customer-centered efforts in order to create shareholder value," he said in a statement.
The push to remodel stores in order to win over shoppers isn't limited to Kroger. Food Lion recently finished updating 71 stores in the Richmond, Virginia, area for $110 million and, before that, freshened up 93 in North Carolina for $178 million.
At more than $1 million per location, these updates aren’t cheap. But they’re vitally important for legacy retailers at a time of unparalleled competition.
Retailers want to provide convenient and welcoming stores for consumers offering tailored products and personalized approaches to build brand loyalty and enhance the shopping experience. Remodels are one way to push that agenda along. If the designs are customer-friendly, the experience engaging, prices are reasonable and potential competitors are warded off, such investments are worth every penny.