Kroger Announces New Ecommerce Strategy and Facility Closures

The digital sales growth has consistently outpaced same-store sales growth, with e-commerce sales increasing by 16% in the second quarter alone. Kroger will close three automated fulfillment facilities in Maryland, Wisconsin, and Florida by January 2026 as part of a new e-commerce strategy aimed at streamlining operations. The company plans to open two new CFCs in Charlotte and Phoenix by fiscal 2026.

Kroger, a major player in the grocery retail sector, has announced significant changes to its e-commerce strategy, which includes the closure of three of its automated fulfillment facilities. This decision is part of a broader overhaul aimed at streamlining operations and adapting to the evolving demands of the digital grocery marketplace.

Facility Closures and New Strategy

The company plans to shut down facilities located in Maryland, Wisconsin, and Florida, with the Brevard County, Florida location ceasing operations by January 2026. These closures are a direct result of Kroger's comprehensive review of its fulfillment network, which has been under scrutiny as part of its efforts to optimize its e-commerce operations.

In place of the shuttered facilities, Kroger is shifting towards a hybrid model that incorporates both store-based fulfillment and third-party delivery services. This approach also includes the utilization of automated fulfillment centers, reflecting a strategic pivot aimed at increasing efficiency and reducing costs.

Background and Future Plans

Kroger's e-commerce business, despite experiencing five consecutive quarters of double-digit growth, remains unprofitable. The digital sales growth has consistently outpaced same-store sales growth, with e-commerce sales increasing by 16% in the second quarter alone. This demonstrates a strong consumer demand in the digital space, which Kroger aims to capitalize on through its new strategy.

The Groveland Customer Fulfillment Center (CFC), which opened in June 2021, the Pleasant Prairie CFC that began operations in June 2022, and the Frederick CFC, inaugurated in June 2023, are the facilities slated for closure. These centers were part of Kroger's initial partnership with Ocado, a collaboration that began in 2018 to enhance its fulfillment capabilities through automation.

New Fulfillment Centers and Technological Advances

Despite the closures, Kroger is not completely stepping away from automated solutions. The company plans to open two new CFCs in Charlotte and Phoenix by fiscal 2026. These centers are expected to employ state-of-the-art technology to improve fulfillment efficiency.

Additionally, Kroger will pilot store-based automation, which aligns with its hybrid fulfillment model. This initiative aims to leverage existing store infrastructure to fulfill online orders, thereby reducing the reliance on large, centralized facilities and enhancing the flexibility of delivery options.

Impact on Local Markets and Services

The closure of the Brevard County facility will affect local grocery delivery services, as Kroger plans to halt such operations in the area. The impact of this decision on the local market is yet to be fully realized, as consumers may need to adjust to changes in service availability and delivery options.

Kroger's decision to overhaul its e-commerce strategy and fulfillment network underscores the challenges and opportunities in the rapidly evolving grocery retail landscape. As the company navigates these changes, it remains committed to meeting consumer expectations through more efficient and innovative fulfillment solutions.

"Kroger's e-commerce strategy aims for streamlined operations," a company representative stated. "By integrating a hybrid model of store-based and third-party fulfillment, we believe we can better serve our customers and drive sustainable growth in the digital space."

As Kroger moves forward with this strategic shift, the grocery giant will continue to adapt its operations to maintain competitiveness and meet the growing demand for online grocery shopping.