Kroger Co. (No. 13 in the 2020 Digital Commerce 360 Top 1000) is setting up an ecommerce marketplace open to third-party merchants, part of the grocery store operator’s bid to wrest web sales away from giants like Amazon.com Inc. (No. 1) and Walmart Inc. (No. 3).
Kroger’s marketplace will be added to its existing Kroger Ship service, an ecommerce platform for non-perishable grocery items launched in 2018. The marketplace will add an extended ship-to-home assortment through offerings from third-party sellers. Kroger says Mirakl, a software platform for B2C and B2B digital marketplaces, will “power” its new marketplace.
The partnership with Mirakl will let Kroger offer “more relevant products” by broadening its ecommerce operations to include third-party sellers of non-grocery products, Jody Kalmbach, Kroger’s group vice president of product experience, said in a statement. Initially, the marketplace will offer more than 50,000 additional items across multiple categories, including natural and organic, international food, specialty items, housewares and toys, the statement says. Kroger says it plans to launch the marketplace this fall.
Kroger says the marketplace is a continuation of its ongoing investments in ecommerce technology under its Restock Kroger strategic plan, which began two-and-a-half years ago. It also comes at a time when the COVID-19 crisis is driving enormous growth in ecommerce grocery sales. In Kroger’s first quarter 2020 results, its digital sales grew 92%.
While the pandemic boosted online and offline sales, it also increased costs. Kroger reported spending $830 million on pandemic-related expenses in the first months of 2020, including $150 million in bonuses to frontline grocery, supply chain, manufacturing, pharmacy and call center employees, Kroger CEO Rodney McMullen said during a June 18 conference call with analysts.
Kroger is looking to capitalize on growth in its digital platforms and heightened demand for essential goods as quarantined customers stock up during the pandemic. Amazon’s marketplace remains the undisputed leader in terms of selection, with hundreds of millions of products listed—but with demand surging amid the global pandemic, many merchants are seeking new online partners.
In July, Kroger and British online grocery retailer and technology vendor Ocado Group Plc (No. 25 in the Digital Commerce 360 Europe 500) announced plans to build three robotic fulfillment centers for online orders in the West, Pacific Northwest and Great Lakes regions of the United States. The new center in the West will measure 300,000 square feet, the Pacific Northwest center will be 200,000 square feet and the facility in the Great Lakes region facility will be 150,000 square feet. Kroger did not disclose the exact locations but says it plans to reveal them soon. The newly proposed facilities join six similar robotic fulfillment centers now planned or under construction.
Harris Diamand, vice president of customer experience at 1WorldSync, an online product content provider for Kroger, says the marketplace “will be able to fill some of Kroger’s gaps,” by making it easier for shoppers to quickly find the food items they want, while also picking up other daily essentials like houseware needs and children’s toys.
“Kroger’s new partnership with Mirakl will give it a boost to stay competitive with marketplaces during the pandemic,” he says. “Right now, it’s less of a battle between bricks-and-mortar chains like Meijer or Publix, and more focused on leveling with Amazon and Walmart as their wide product offerings make it easier for consumers to get everything from a single destination—especially as customers continue to avoid physical storefronts.”
Online marketplaces let retailers offer inventory without having to buy it wholesale, minimizing the risk of getting stuck with unsold products needing markdowns. Third-party merchants typically pay a commission on each sale, and mature marketplaces like Amazon and eBay also sell advertising to merchants looking to stand out, providing an additional revenue source to the marketplace.
Marketplaces are popular because consumers are often drawn to the breadth of products available on a single site. However, counterfeit products, long shipping times and subpar product quality are top concerns for consumers when shopping on multi-merchant sites.
Mirakl works with retailers such as Office Depot (No. 20) and Urban Outfitters (No. 34) in the U.S., Best Buy (No. 10) in Canada and Carrefour in Brazil.
Kroger operates grocery stores in 35 states under a variety of banner names, such as Kroger, Pick ‘n Save, Ralphs and Mariano’s.Favorite