Physical to Digital – Phygital

kroger alibabab

How Kroger is driving Physical into Digital

Kroger is accelerating it’s Data and Digital capability fast , after buying out the JV with dunnhumby a few years ago, it’s announced two new strategic partnerships with Ocado and Alibaba

Two Partnerships

Kroger, which was founded in 1883 in Cincinnati, Ohio, is the United States’s largest supermarket chain, and in fact is one of the largest such chains in the world. With stores in 34 states, Kroger is a household name that for many typifies traditional brick & mortar stores. This week they announced a partnership with Chinese internet giant Alibaba, specifically to open an online storefront on Alibaba’s platform for international brands, Tmall Global. This first move into overseas sales is part of grocer’s online retail push. This sits alongside a recently announced plan with Ocado, to launch Kroger Ship an online food delivery service picked from automated warehouses.

Organic goods, dietary supplements, and other private-label products are expected to be included in the initial product offering.

Competitive Landscape And Why This Is Big

Kroger’s move comes as its traditional competitors aggressively cross into the digital space, while “digital” companies barge into what used to be Kroger’s exclusive territory.

Walmart, for its part, recently acquired a majority stake in Indian e-commerce giant Flipkart Group. It has been pursuing a strategy of leveraging their physical store base to drive them forward in the ecommerce landscape. What’s more, Walmart owns a 12% stake in JD.com Inc., Alibaba’s largest rival in China.

Amazon has been doing the opposite, particularly with their Whole Foods purchase, as they seek to expand their physical footprint while taking advantage of their digital strength.

Alibaba already owns 2 of China’s most popular e-commerce websites and is staving off competition from the aforementioned JD.com. They have also been active in signing on other US brands, such as Macy’s, Costco and Starbucks.

Digital For The Win

Digital is the way forward for even the most traditional brands. While perhaps a bit late to the party, the Kroger-Alibaba deal shows that companies not harnessing the power of ecommerce effectively have to have a smart strategy to catch up – and succeed – in the new era of ecommerce. This could be through acquisitions, mergers, or allying with the right digital partner. the proposed Asda / Sainsbury’s Merger is another example of retailers merging to compete vs digital competitors ( in this case amazon in UK)

When it comes to that right partner, companies both large and small are seeing the need for a holistic picture of their own operations, as well as the industry at large. Today, successful companies are leveraging data to spot future trends and markets, as well as to fine-tune minute details such as ranges, pricing, availability.

Author: Andrew Mann

Managing Partner at NorthBailey. Having had senior marketing & insight roles at Tesco, Sainsbury's, Asda, Coop and M&S, I'm now using my experience & network to solve strategic marketing problems for NorthBailey clients

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