Kroger 2015 Annual Report Download - page 5

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Beyond the Core
We believe that a differentiator for Kroger is the convenient locations of our stores, nearly all of
which are within two miles of our customers’ homes. A strategic question for us is how do we leverage
an asset like convenience to improve our customers’ lives even more? Expanding ClickList – our
order online, pick up at the store service – is one way. As of the end of the first quarter 2016, ClickList
and Harris Teeter’s ExpressLane service are operating in 221 stores. Customer feedback has been
remarkable – they love it and tell us pickup is just as convenient, if not more convenient, than home
delivery. We will continue expanding the availability of ClickList in more stores and more markets. Longer
term, we are working toward providing our customers with a truly seamless shopping experience, where
they can count on us for anything, anytime, anywhere.
Our private label Corporate Brands offering remains a competitive advantage for us. Simple Truth
and Simple Truth Organic reached $1.5 billion in annual sales in 2015. Customers are embracing our
philosophy that you shouldn’t have to pay higher prices just because a product is natural or organic. And
we are there for them, continuing to grow our reputation as a destination for fresh, local and sustainable
products, all at affordable prices. In 2015, our natural and organics sales totaled well over $12 billion.
We continue identifying potential partners that enhance our ability to deliver on our strategy beyond
the core. An example is our recently-announced strategic partnership with Lucky’s Market, a specialty
grocery store chain focused on natural, organic and locally-grown products. Our interest and investment
in Lucky’s is fueled by the company’s great people and unique go-to-market strategy – with a 30,000
square foot store format that resembles an indoor farmers market and a culinary department that
showcases amazing, restaurant-quality prepared foods.
Innovation
Across our business, we are innovating and striving for an even stronger, more personalized
connection with our customers. We have found that the better we connect with customers one-on-one,
the better experience they’ll have and the more loyal to Kroger they will be. It may sound counter intuitive,
but Kroger uses “big data” to help each customer in the most individual way, such as targeted offers for a
new product we think they will like but haven’t tried before.
I use a digital activity tracker to help me stay in shape (10,000 steps or more per day). What I like
about activity trackers is the immediate feedback – at the end of the day, either you hit your step goal
or you didn’t. There’s no deceiving yourself. That is the core principle behind Kroger’s use of data: Data
helps you to be honest with yourself. 84.51°, which we introduced in April 2015, helps us understand our
data so we can be incredibly focused on actual customer preferences – especially when they run counter
to our assumptions.
We continue to experiment with new technologies, new products and new store formats. Last year
we launched a Digital Shelf Edge pilot. This proprietary technology can display high-resolution shelf
tags and rich media content right at the point of purchase. Customers have been very receptive, and an
added benefit is that digitizing price tags frees up store associates to focus even more on serving our
customers. We view this as foundational technology, and while we still have a lot of work to do to prove it
is scalable, we are excited about the possibilities for connecting with mobile devices and offering tailored
content.
Corporate Brands is developing entirely new brands found exclusively in our family of stores. In
2015, we launched one such new line called HemisFares. Whether it is rich and creamy Sicilian Gelato
or freshly-harvested, extra virgin olive oil from the La Mancha region of Spain, our goal with HemisFares
is to bring only the best food finds to our customers by offering products imported directly from the most
food-rich regions of the world.
In early 2016 we launched Main & Vine, a new, community-focused concept grocery store in
Gig Harbor, Washington. Main & Vine reimagines the grocery shopping experience by featuring produce
and bulk items in the center of the store, rather than the perimeter as you’d see in most of our stores. The
concept features an Event Center where shoppers can enjoy cooking demonstrations, food and beverage
tastings, and find new recipe ideas, and it offers an array of products including fresh, organic, local and
specialty foods alongside everyday products, all at affordable prices.