Kroger's New E-Commerce Unit – Smart Move or Eventual Disaster?
In the latest edition of Omni Talk’s Retail Fast Five, sponsored by the A&M Consumer and Retail Group, Mirakl, Simbe, Infios and Ocampo Capital Chris Walton and Anne Mezzenga discuss how Kroger is betting big on e-commerce—but is its strategy already flawed? In this segment, brought to you by the A&M Consumer and Retail Group, Simbe, Mirakl, Ocampo Capital and Infios, Chris and Anne debate Kroger’s controversial decision to separate online operations into a standalone unit, question the leadership choice, and unpack whether this sets Kroger up for success—or disaster.
(0:03) – Kroger forms new e-commerce business unit
(0:11) – Yael Cosset promoted to EVP and Chief Digital Officer
(0:32) – Kroger CEO Ron Sargent emphasizes digital growth
(0:56) – Should e-commerce be a separate division?
(1:46) – Why this goes against omnichannel best practices
(2:53) – Is Kroger stuck in the sunk cost trap with Ocado?
(3:54) – Concerns over leadership structure and priorities
(6:07) – Are digital sales underperforming despite the investment?
(7:14) – Final thoughts: too many risks, not enough clarity
Don’t miss this deep dive into a major retail shakeup—and what it could mean for the future of grocery e-commerce. For the full episode head here: https://youtu.be/K-LainhQQyY
#kroger #ecommercestrategy #retailnews #grocery #ocado #omnichannelretail #digitaltransformation #onlinegroceryshopping #retailtech #retailinsights
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Transcript
Kroger is launching a standalone e commerce business unit.
Speaker A:You heard it right.
Speaker A:According to Grocery Dive, Kroger has formed a business unit centered on its online operations and promoted its Chief information officer to head the new team.
Speaker A:The supermarket chain announced.
Speaker A:The group brings together the personnel, quote, contributing to every aspect of the online customer experience.
Speaker A:End quote.
Speaker A:For Kroger.
Speaker A: resident and CIO of Kroger in: Speaker A:Kroger Chairman and newly appointed CEO Ron Sargent said in a statement, quote, accelerating Kroger's e commerce growth is a top priority.
Speaker A:As the architect of Kroger's digital strategy, Yale will continue to make it easier for customers to shop our fresh, affordable food.
Speaker A:End quote.
Speaker A:Chris, I got a two parter double header for you.
Speaker A:Two parter Number one, do you agree with Kroger's decision to create a standalone e commerce unit?
Speaker A:And number two, you're getting the A and M put you on the spot question, which is, oh, it seems like this formal organization of Kroger's e comm business is long overdue, especially with the ocado struggles.
Speaker A:What do you think this says?
Speaker A:That they put their chief information officer atop it versus an operational leader?
Speaker A:Please.
Speaker A:All right.
Speaker A:Dazzling.
Speaker B:Nice delivery on that one too.
Speaker B:And get this show started off right.
Speaker B:All right, man, I, I'm going to come out hot on this one.
Speaker B:And I think my Buddy Carl on LinkedIn who messaged me about this story, you know, I have two friends named Carl on, you know that with KS2, which is just random Carl.
Speaker B:But anyway, I'm coming out hot.
Speaker B:I'm coming out of the gates hot on this one.
Speaker B:And first off, I, I don't like this move at all.
Speaker B:And secondly, to get to the A and M question, I don't agree.
Speaker B:I don't agree that the premise of this move is long overdue.
Speaker B:I don't agree with the premise that this move is long overdue either.
Speaker A:Really?
Speaker B:Okay, Yeah, I do, 100%.
Speaker B:I say that for a couple of reasons.
Speaker B:So one, this flies in the face of whatever you want to call it, good omnichannel, unified commerce, whatever the heck the buzzword is harmonized retail shout out to Steve Dennis.
Speaker B:It flies in the face of that.
Speaker B:It just does, as you know.
Speaker B:And this is coming from someone who piloted an Omni Channel organization structure at Target to help them develop their omnichannel approach, an approach that others Sense like Walmart have adopted.
Speaker B:So I can tell you firsthand, this is really the only way to go.
Speaker B:Because doing it, doing it the opposite way with a standalone division creates all kinds of disjointed problems in the organization.
Speaker B:So just.
Speaker A:And priorities.
Speaker B:Yeah, yes, right.
Speaker A:Everything.
Speaker B:Priorities, Everything.
Speaker B:Like, yes, focus.
Speaker B:You start getting turf battles, everything.
Speaker B:So strategically, I just fundamentally disagree with the organizational approach.
Speaker B:But second, I think there's another big issue here and that it's that I worry that Kroger is falling into what I call what what many would call the sunk cost trap.
Speaker B:They made the big Ocado investment.
Speaker B:They don't appear to have gotten the return that they wanted.
Speaker B:So now they're throwing good money after bad and good people after bad.
Speaker B:So it's a classic case from the first year of business school of what not to do because you're doubling down on trying to fix the mistakes of your past.
Speaker B:Which also explains why they're putting someone that they trust with a good track record to try to fix it.
Speaker B:But to A and M's question, how much.
Speaker B:How much can a digital guy fix what is essentially a piece, that being Ocado, of a much larger puzzle for how Kroger gives its consumers what they want.
Speaker B:So this move, you know, net.
Speaker B:Net, particularly in the absence of a former CEO or the absence, there's, you know, they just had to get rid of their CEO, so guy in place.
Speaker A:Right.
Speaker B:It seems like, I mean, this seems like it could be the start of a dumpster fire.
Speaker B:To be honest.
Speaker B:I just don't get this at all.
Speaker B:And, But I don't know.
Speaker B:What do you think?
Speaker B:Talk me off the leg.
Speaker A:No, I'm not going to talk you off the.
Speaker A:Chris.
Speaker B:No.
Speaker B:Because you're not going to be my balance.
Speaker B:No.
Speaker A: a move that you would make in: Speaker A:Like the, the real problem for me in this, in this whole story is every aspect of the online customer experience.
Speaker A:Like, yeah, that's the problem here.
Speaker A:It should.
Speaker A:I don't think we can think in channels like this anymore.
Speaker A:I mean, that's the whole point of this move towards unified commerce.
Speaker A:Like people aren't just doing.
Speaker A:No, no consumer of Kroger is just shopping online or just shopping in store.
Speaker A:It's about the total experience and the success of any of these grocery businesses depends on a strategy that's focused on, you know, meeting the customer at all these touch points.
Speaker A:So I think it's.
Speaker A:It just seems strange.
Speaker A:The other thing that I would add is Yale has been in this role at Kroger.
Speaker A:He's done a tremendous job, but look at all the stuff that he has underneath him, too.
Speaker A:Oh, go ahead.
Speaker B:No, no, you keep going.
Speaker B:No, you got.
Speaker B:No, I'm right with you.
Speaker B:You keep going.
Speaker A: 's in charge of retail media,: Speaker A:Like, how I get that you have to ladder up and there's people that are underneath him.
Speaker A:But again, this just seems like way too many competing priorities.
Speaker A:And especially when you throw things like retail media and like, insights and content and financial services into the mix, like, those are huge sources of revenue for Kroger and for any future that Kroger has.
Speaker A:And so I feel like this is, this is just asking too much of one person.
Speaker A:And in a way that just exactly like you said, Chris, like, there's too many competing interests, priorities.
Speaker A:And I don't know how you set Yale up here for success, but it just, it seems like the, the totally wrong way to be thinking about it.
Speaker A:And especially given, you know, coming out of all of the news that's happened to Kroger, with the CEO leaving, the failed merger with Albertsons, like, it just feels like a place where they're, they're just like, putting all their faith in Yale and not setting them up for success.
Speaker B:Yeah.
Speaker B:And what I was going to say, what you got me thinking about too, is like, I actually, there's a little bit from this story that actually makes me question how well Yale is actually done in his job too.
Speaker B:Because if you think about, if you think about meeting the needs of the omnichannel consumer, right?
Speaker B:There's the front end side of it and there's the back end side of it.
Speaker B:The back inside of it clearly hasn't been working.
Speaker B:But you're saddled with a big investment that you made where the infrastructure is the infrastructure.
Speaker B:So there's only so much you can do about that.
Speaker B:So then you get, then you start to say to yourself, okay, was it not working because they haven't marketed right, or they don't have the experience, right.
Speaker B:To, to get the volume they need to make the investment pay off in the way that they want.
Speaker B:So, so it's one of those, you know, it's one of those two things.
Speaker B:And so like, if it's the, if it's the latter, then you're like, well, wait a second, is this the guy, the right guy to run it?
Speaker B:If they haven't been able to figure out the marketing and the front end experience of this to make it work and to get it in the consumer, because they've tried these online only plays in markets, and they've had to shut those down.
Speaker B:They've had to close facilities.
Speaker B:So for some reason, they're not getting.
Speaker B:Even though they're talking about how much their digital volume is growing, it's not growing to the extent that they actually want to make this, the Cardo investment, pay off in the way that they want in the right areas of the country.
Speaker B:So.
Speaker B:So there's just so much going on here, which makes this story so bizarre to me.
Speaker A:Yeah, I totally agree.
Speaker A:Yeah.
Speaker A:I mean.
Speaker A:Oh, good luck to you, Kroger team.
Speaker A:I don't know what else to say at this point.
Speaker B:Yeah, it sounds like, I mean, God, they got to get somebody in there quick now because this could just blow up in their face here over time.
