The Kroger Co. Goes Beyond Brick-and-Mortar

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The Kroger Co. Goes Beyond Brick-and-Mortar

By Alarice Rajagopal - 05/09/2016
In 1883, Barney Kroger invested his life savings of $372 to open a grocery store at 66 Pearl Street in downtown Cincinnati. Today — through a series of key mergers and acquisitions over a century — The Kroger Co. (Kroger) has more than 5,500 stores (includes all formats) across the United States, with annual sales of more than $100 billion. Little did Mr. Kroger know that he would be laying the foundation for what today ranks as one of the largest companies in America, based on the same business principles he started with — service, selection and value.
Although brick-and-mortar retail has been the focus from the very beginning, omnichannel strategies are changing the future of how consumers are shopping. Furthermore, it’s not just a new challenge for retailers, but brand owners as well. There is now a greater need for suppliers to collaborate even more closely with their retailer partners to ensure the traditional in-store experience seamlessly blends together with digital, into a truly omnichannel consumer experience.  
An Opportunity Arises
With brick-and-mortar formats that include supermarkets, hypermarkets, department stores, convenience stores, and even mall jewelry stores, Kroger knows that its business can be both an advantage and a disadvantage versus a start-up digital retailer.
“Our stores afford us locations, but obviously were not originally set up to be digital points of distribution,” explains Dave Schmitt, enterprise business solution architect for Kroger.
But, the grocer had decided to implement a program to address this and other business opportunities and turn this seemingly disadvantage into an opportunity.

Couple that with customers who now expect to be satisfied on their terms, at the time, place, price, service and equations that hold the most value for them. So, after nearly a decade of discussion, and with a business team in place to move forward, Kroger embarked on a program focused on operational efficiencies that would later spill into benefits well beyond their initial intentions.
Enter Program Mercury
In original discussions, Kroger wanted to use better and richer item data to drive cost out of the business and make its associates more productive. Of course, over time, the needs of its business and, more importantly, the needs of the consumer have changed dramatically. Hence, the idea of Program Mercury was born, but it was apparent early on that it would certainly be a team effort.
Ryan Kean is the program director for the Mercury Program, as well as senior director of shared technology services. His responsibilities include centers of excellence for Kroger’s business analyst, project management and architecture roles. It also includes the portfolio management team, quality assurance department and call centers. Schmitt oversees the business team put in place to support the project, and Chris Kirkland is Business Solutions architect, making sure the business and customer interests of the traditional perishable departments are incorporated into the project.
“The conversation with a customer used to be driven and owned by the retailers, but this has changed for the better over time. The customer wants to know more about what they buy,” says Kean. “They now own the context of that conversation, and we have shifted the goals of the program to align with what we believe our customers want.”
Since omnichannel commerce requires that product data, regardless of category, is viewable online, Kroger has partnered with 1WorldSync to obtain item specific content directly from the most trusted source — the brand owners.
Improving a consumers’ online experience by delivering high quality and complete data about the products in its stores is certainly a goal for Kroger. Not only do these products need to be accessible online, but also require additional attribution for online digital presentation. These improvements in data availability, transparency and completeness are essential for enabling Kroger’s customer facing applications like mobile apps, ClickList, etc.

Kirkland reveals that part of the Mercury conversation was also the need to upgrade the speed, capacity, performance and flexibility of the item database itself. Kroger simply did not have the capacity to store product attributes beyond the basic operational/legal/regulatory information.
He adds, “Beyond increasing the amount of customer facing information, we want to improve the conversation between us and our trading partners about the trends that customers like and don’t like. Then we make better, more informed product decisions.”

How would the team know that this was successful? Success could potentially be measured by pointing to Mercury data as the reason behind purchasing, item allocation, or merchandising strategy decisions.
Beyond Expectations
The team already realizes the operational efficiencies from this data, and knows they will have a better understanding of shopper demand, but there are some benefits that have gone beyond what they expected, and some that they don’t even see yet.
“One of the benefits that we discuss a lot is being able to use the data to improve the retail ecosystem,” says Kean, who also notes that the overall quality of item data across the retail industry is not outstanding. “We want to be a benchmark for detailed (or transparent) and complete item data and help the retail ecosystem realize the benefits of better data. We believe that this will help our partners, Kroger and, of course, our customers.”
Kirkland agrees, “There are many potential uses for the data: customers, business users, trading partners, stores, distribution centers, legal/regulatory, merchandising/selling, analytics, our manufacturing plants, corporate brands, etc. All of these groups benefit by a much richer set of data than we’ve had in the past.”
The program, however, has not come without its challenges. Similar to other large, complex, multi-year efforts, there were many times when it was very difficult to see the end game, but there were two factors that set this project apart. The first is that the Mercury team has had consistent support from senior executives.
“They have held us to a high standard and pushed to realize benefits, but they have always understood the challenges of doing something at this scale,” says Kean.

The second is that the program team is unbelievably committed to Mercury. When a project like this goes on for multiple years and goes through its challenges, it is not uncommon for people to want to seek other initiatives within the company. But, Kean says the company has actually had people turn down new opportunities to stay on the program and help make it a success.
Even with a large transformation nearly two years ago when Kroger adapted Agile as the solution development methodology, it helped them see everything from a different point of view. The team became singularly focused on driving value through better data. Although it seems like it should have always been the case, there are always challenges with any large implementation like scope creep and the lure of chasing shiny objects, according to Kean.
Partnering for Success
While the program thus far has been a major focus of the Mercury team, the benefits are spilling into a couple partnerships that are seeing the potential as well.
In April 2015, Kroger acquired Dunnhumby’s tech assets to form 84.51°, a new analytics unit focused on leveraging better consumer insights to help its partners drive promotions and marketing activities. Kroger’s work with this new unit has been discussed at length. With better, richer item data as another feed that can help drive greater insights that are more meaningful to consumers, they are creating better paths.
Kirkland expands, “Customers are demanding that we know them and their families, understand them and their habits, and provide ways to save them time and money. One path is the customer interaction with our associates and stores. Another path is through data. Better data equals better paths.”
While 84.51° is a separate initiative, there is a realization that better data elevates the entire enterprise and will at some point just become another source of data that will provide more sophisticated insights.
Another important partnership the program focuses on is collaborating with the brand owners. A core principle of Program Mercury is for suppliers to own their master product data. In a digital world where every aspect of an item can be viewed online, it is in the best interest of suppliers to maintain that data to keep it accurate, complete, and up to date.
“We feel that it helps protect the brands and suppliers that we partner with to heavily engage them in this effort. However, given the scale that Kroger operates, this has been a difficult journey. It has required training, change management, and assisting thousands of suppliers,” says Kean. 
Another challenge for suppliers is getting their data and sales groups on the same page when submitting items through the GDSN network, which is not exclusive to Kroger (see ‘Brand Owner Benefits’ sidebar).
As an added benefit, Kirkland asserts, “This project has helped us understand the need to collect the same information for our corporate branded items.”
For example, having accurate weights and dimensions for all levels of a product hierarchy are beneficial for Kroger in its logistics and merchandising operations, however it is also important to suppliers.
Many suppliers have told the Mercury team that this project is the first time they have gathered data from across their own internal company groups – data they should have known anyway. Other suppliers have joined the GDSN network because they believe in the power and value of a standard data exchange platform.
“Ultimately, as trading partners, we need to spend less time exchanging data and more time ‘listening’ to our customers and responding to their needs. We want suppliers to commit less time/people/resources to submitting item data, and focus on those activities that directly benefit our customers,” says Kirkland. “I also believe that we are in the very early stages of collecting data, so there are many inspiring and creative ways to use this data that will reveal themselves later.”   
The team is just scratching the surface of the benefits that Program Mercury will bring to consumers. For instance, if consumers have a gluten allergy, they will want to know — with confidence — that everything they buy will be safe for themselves and their families. “We want to earn the trust of the consumer and be the first retailers they think of when they shop,” Kean says.
The Future of Mercury
The Mercury team strongly believes that they are creating a legacy at Kroger as well as a capability that will benefit all of retail and their customers.
“Once the team is galvanized around that vision, it becomes much easier to work through even the most difficult challenges,” says Kean.
Today, Kroger has become a forward thinking and planning organization. The company realizes that business constantly changes, but similar to its founder over a century ago, the team hasn’t strayed from its ‘Customer First’ strategy.
“That means we always look to keep one step ahead of our customers’ needs, or at the very least, not very far behind them. More than ever, customers reward organizations that listen and adapt, and you have to have the right information and technology to ‘listen,’” closes Kirkland.

A History of Firsts
  • In 1901, Founder Barney Kroger, became the first grocer in the country to establish his own bakeries. He was also the first to sell meats and groceries under one roof.
  • Mr. Kroger spied the promise of increasing his income by manufacturing the products he sold. It began when he bought far more cabbage from farmers than he could expect his customers to buy. He took the cabbage home to his mother who, following her favorite recipe, turned it into tangy sauerkraut that proved hugely popular with his German customers.
  • In that first Kroger store on Pearl St., the manufacturing effort was born in a back room, now accounting for about 40% of private-label items found in the company’s stores today, and 26% of Kroger’s total store dollar sales.
  • During the 1930s, Kroger was the first grocery chain to routinely monitor product quality and scientifically test foods.
  • In 1972, Kroger became the first grocery retailer in America to test an electronic scanner.
  • Also in the ‘70s, the company became the first grocer to formalize consumer research, interviewing 4,000 shoppers the first year. In 2014, the company listened to 9,661,855 customers, who provided invaluable feedback and insights.
Brand Owner Benefits
By Using the Kroger Vendor Item Portal (VIP), Suppliers can...
• Leverage the value of GDSN by adopting global data standards.
• Instantly update the Kroger team of item modifications.
• Improve data accuracy, as all item information will originate with and be owned by the supplier.
• Enhance communication of relevant item data to Kroger suppliers.
• Help Kroger and suppliers look at items like customers do so they can both sell more product.