Kroger Extends Reach With New Automated Grocery Delivery Sites

The largest U.S. grocery chain is adding fulfillment centers across the country through its partnership with technology company Ocado

Kroger Co. is using its partnership with grocery-warehouse technology provider Ocado Group to extend its reach with new automated fulfillment centers for online orders in the Northeast, Florida and California.

The expansion announced Tuesday will give the largest U.S. supermarket chain by revenue its first operations in the Northeast and advance Kroger’s plans to double its digital sales and profitability rate by 2023, the company said.

The additions follow the opening of Kroger’s first automated fulfillment center with Ocado in Monroe, Ohio, in April under an agreement the chain struck with the U.K.-based online grocer in 2018.

Ocado’s automation uses software, robotics and artificial intelligence to operate warehouses with a minimum of human workers in spaces that are more tightly confined than traditional distribution centers. Such highly automated fulfillment sites are aimed at moving goods faster and efficiently through distribution systems to consumers’ homes, potentially providing a speed and cost advantage in the growing business of online grocery shopping.

Kroger, which operates the Ralphs, Harris Teeter and Dillons chains along with its own name-brand stores, has been investing in online sales and delivery for several years, and the surge in online shopping since the pandemic began has given the effort more urgency. The chain said last month it would work with food-delivery specialist Instacart Inc. to deliver food and household staples in as little as 30 minutes.

Instacart is also looking at getting more deeply into grocery fulfillment with plans for a network of highly automated warehouses that the company would operate for supermarket chains.

Investments in grocery delivery and automation come with the risk that consumers won’t want to absorb the extra costs of grocery delivery, said Sucharita Kodali, a vice president and principal analyst at Forrester Research Inc. who focuses on e-commerce and consumer behavior. But retailers and grocers are scaling up to compete with the rapid growth in the market of Amazon.com Inc. and Walmart Inc.

“You can’t be in a hypercompetitive industry like retail and not try something new,” she said.

Ocado also counts the U.K.’s Wm. Morrison Supermarkets PLC, French grocer Groupe Casino, and Canadian food store Sobeys Inc. among merchants using its e-commerce technology. It also has a joint venture with British retailer Marks & Spencer Group PLC.

Startups are promising to deliver groceries to your doorstep in minutes, stepping up competition in the industry. Their strategy: to operate out of “dark stores.” WSJ visits some of these hyperlocal warehouses to see how they operate and the challenges they face. Photo/Video: Michelle Inez Simon

Write to Lydia O’Neal