Kroger's E-Commerce Identity Crisis? | Fast Five Shorts

Kroger plans to use DoorDash's Dashmart service for delivery.

According to GroceryDive, Kroger plans to use Dashmart fulfillment services, a new online delivery service from DoorDash that relies on delivery focused stores as it operates across the country.

The grocer, which plans to offer groceries and household items through the service, will join other retailers like CVS which are currently using the DoorDash service.

The announcement comes on the heels of Kroger expanding DoorDash delivery to all 2700 of its stores and and highlights the grocer's reliance on third party delivery companies to help power its e commerce business.

And also after executives said that they are reexamining Kroger's Ocado automated warehousing infrastructure.

Chris, what do you think that Kroger's increasing ties with DoorDash say about its e commerce strategy?

Oh, and I worry it tells, it says a lot and I worry, it tells me that Kroger's e commerce strategy is a little bit lost and it's trying to grapple in the dark here, you know, trying to find its way in the dark here.

And when I say that, I say that, you know, and totally understand it.

Right.

Like I could see myself falling into the same trap.

Like, because there's a lot of psychology in how the decisions are coming out here or how the headlines are being put into the media.

So for example, like, you know, and that's why we started Omni Talk is to go behind the headlines and the psychology of how the executives are really trying to think.

And so, so like step back for a sec.

Think.

Old regime makes a huge bet on Ocado.

New regime comes in, they don't like how the results are playing out.

So now they're swinging the pendulum and they're going all in on two things.

Store delivery support with Instacart and DoorDash.

They've added DoorDash to the mix and now they're going into like what is essentially a micro warehousing support with the dashmark concept.

So that's taking it out of the store and going with the dashmart.

So which is essentially for the most part from what we know, probably a manual picking small warehouse nearby that you, you can access quickly.

So they're, they're swinging the pendulum completely.

But the smarter move to me is to be if I'm Kroger and I'm an executive at Kroger, I'm asking myself where do I want our network to really be in 10 years?

Because I guarantee the answer to that for everyone, not just Kroger, but for many people in the grocery industry should not be running through Doordash and Instacart's marketplaces at all.

At best they should be white label delivery providers for you, which I think is very smart if you do it that way because.

Because you have to start figuring out how to fulfill the demand yourselves and how to make it economical with the right technology and automation running your warehouses or running your partner's warehouses.

So.

Because if you don't, and here's the big if, if you don't, Walmart and Amazon are going to figure that out and they're going to drive the volume towards e commerce to them in the long run because they're going to know how to do it cheaper and more efficiently.

Yeah, I think your thinking is right in line for where I was on this too.

I mean for me I start to think about what does this mean for the store operations.

We're hearing this from a lot of retailers, not just Kroger, that you know, they're looking at how to fulfill orders from the store now because it's more efficient because they're not reliant on a third party as much.

And it doesn't put, you know, potentially like an Instacart, like shoppers walking through the stores and crowding aisles.

But I think what I'm interested in seeing here is they talk about reevaluating, reevaluating Ocado and the independent warehouses.

I'm wondering if we don't start to see them push Ocado to pivot towards like the Ocado Zoom micro fulfillment platforms that they're starting to put in their stores like you're talking about.

Because all of these, all of this demand for stores they're not prepared for right now.

They have to start thinking about automation.

Whether that's testing the likes of a fabric or a dramatic.

But you know, being able to fulfill these orders at a frequency like fabric.

Remember the save a Lot store we went to?

Like they were fulfilling orders.

You could do a 50 item grocery order in six to eight minutes.

Like that's.

You cannot do that with your human workforce or with, you know, a third party coming in.

I think that's what I'm really curious to see is, is does this cause the retailers to invest more in automation in the back of house so that they can deploy their own workforce either, you know, help get orders ready for the third party DoorDash delivery providers or start to explore doing the delivery themselves too?

I think you have to start looking at how you're making your, your store operations run more smoothly and your back of house run smarter in order to fulfill this.

Either way to have success no matter who your third party provider is.

Yeah, and a couple of points of clarification too.

So Dashmar is actually they're running the warehouses themselves so they're taking the in store picking phenomenon out of this.

So that's one important, that's important to call out and make sure.

But, but they are still using DoorDash too for the in store picking.

So that's a, it's, it's an interesting point.

The other point I'd mention though is if you step back from the executive position, they're not likely going to look at other solutions providers on the technology side because they're so, you know they're in a partnership with Ocado.

Right.

But that, that makes me think like yes, you should be looking at what does the network need to support, how are you going to drive the most volume through whatever automation you have running through Ocado.

And, and I'd be pulling back like crazy my partnership with Instacart and DoorDash in those markets where I've got this infrastructure set up.

Because that's what it's there for and that's what it's designed to do.

Yeah, absolutely.