Report: Kroger's online sales growth slows significantly
- Kroger’s online sales in 2018 have brought in steady revenue, but its growth for the first six months of the year is down 10% compared to its 140% growth from the same period in 2017.
- According to analysis from Edison Trends, Kroger has yet to reach the same degree of online-generated revenue growth as it did last year. The company also experienced dips in both February and June.
- Still, Kroger’s online sales in August were approximately 50% higher compared to last year during the same period, while order volumes and weekly values of revenue grew 25-30% from June to September.
On its earnings call Thursday, Kroger executives noted that 2018 is a year of investments, which may have caused the company to miss same-store sales estimates in its second quarter. It is also a year of adjustments as the company begins to implement its Restock program, which includes a focus on private label brands, lower prices, rearranging store layouts and digital initiatives. Analysts said this short-term disruption could cause some Kroger customers to shop elsewhere.
That could explain the slowed growth in online revenue outlined by Edison Trends. As online and offline competition in the grocery category intensifies – particularly among Walmart, Target and Amazon – Kroger's sales have come under increased pressure. And while Kroger was an early mover with its store pickup program, competitors are quickly catching up.
Still, CEO Rodney McMullen reiterated that everything Kroger is doing has a “clear strategic intent in line with our vision. Everything we are doing is intended to create a truly seamless shopping experience.”
Kroger will continue to invest heavily in its digital business and convenience initiatives – including automated warehouses, home delivery, curbside pickup and direct-to-consumer shipments – which could spur online growth once more. Executives noted that digital grew by 50% this quarter and 80% of customers now have the ability to interact with ClickList or delivery, up from about 70% in Q1 — impressive numbers to be sure, but paling in comparison to 2017.
Taking short-term hits for long-term success isn’t unusual for public companies. And, although Walmart and Target both exceeded earnings expectations last week, McMullen seems unfazed, stating: “If you look at market share overall, we continue to gain share … We continue to see overall market growth, which is good.”
Additionally, Kroger has experienced a material uptick in the past month, which could indicate that the company is winning customers back after its slow start to the year. It’s also worth noting that Kroger plans to employ more than 1,000 people at its new digital headquarters by 2020, and that its new Innovation Lab at the University of Cincinnati was just announced. In other words, causes for concern might be a bit premature. But as players in the category continue to accelerate their digital offerings, it's clear Kroger's long-term goals need to be sure bets.
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