CIOs Learn From A Pandemic What It Means To Be Ready

Kroger thought that they were ready, but they were wrong
Kroger thought that they were ready, but they were wrong
Image Credit: Kipp Teague

There is no way that any of us could have seen the Covid-19 pandemic coming our way. This is something that none of us have ever experienced before and in fact the people who taught us how to do our job had never had to deal with anything like this either. Yes, there are things that we could have done that would have allowed us to be better prepared, but there was nothing that we could have done to be completely prepared. This is exactly how one CIO now feels…

The Challenge Of Running A Grocery Store During A Pandemic

The CIO at Kroger Co has spent years investing in technology to give the company a digital edge in the grocery business. But when the coronavirus changed customers’ buying habits overnight, it turns out that the grocery chain wasn’t as ready for the online shift as some of its competitors. As the nation’s biggest grocer, Kroger has poured money into projects ranging from a self-driving grocery delivery robot to a partnership to sell goods in China through Alibaba Group. It also placed a bet that a delivery model using remote fulfillment centers, popular in Europe, would resonate stateside. However, when the pandemic sent a tsunami of customers ordering groceries online for the first time, its IT systems were unable to meet the higher demand.

The wide-ranging investments that the person with the CIO job had made slowed adoption of technology for grocery delivery, leaving Kroger behind some of its competitors. The CIO viewed the technology investments and partnerships as being timely and allowed the grocer to quickly expand its e-commerce services. In response to the pandemic, Kroger has since expanded contact-free payments and introduced contact-free delivery and low-contact pickup. It is also in the process of testing a subscription program that provides a year of delivery for an annual fee of $79.

Kroger has achieved higher sales as customers have cooked more at home. During its first quarter, same-store sales excluding fuel were up 19% from a year earlier, while profit jumped 57% and digital sales nearly doubled. But other chains have posted bigger gains. Albertsons said same-store sales rose 27% and digital sales nearly quadrupled . Target Corp.’s same-store sales jumped 24% and digital sales nearly tripled. Kroger and other companies have said many customers’ grocery purchases continue to exceed the previous norm as they remain mostly at home and work remotely.

Dealing With The Fallout From A Pandemic

While Kroger continues to benefit from higher grocery purchases, the company has more work to do to meet customers migrating online. The Kroger CIO understands that there are some more investments required for digital. Online demand has at times swamped Kroger and other grocers, despite their best efforts to enable more delivery and online orders. Retailers including Kroger added time slots for pickup or delivery, hired employees to handle online orders and relied more on 3rd party companies like Instacart to take and fulfill grocery-delivery orders.

To make things easier for their digital customers, Kroger eliminated service fees for pickup and introduced a mobile feature that allows shoppers to notify the store when they are coming to pick up an online order. It also rolled out a pilot phone-order program for customers who are elderly or lack internet access. And the Home Chef meal-kits business Kroger bought in 2018 has generated strong sales and user growth during the pandemic. The Kroger CIO is really trying to be able to support their customers’ needs.

One of Kroger’s main e-commerce investments in recent years was a deal with U.K.-based Ocado Group to build remote, largely automated fulfillment centers that executives believed would help the grocer fill online orders efficiently and at great scale. The companies have identified nine regions to build the centers in, including Ohio and Florida. The warehouses will vary in size and proximity to Kroger stores and that Ocado’s technology will improve the retailer’s pickup operations, too. Kroger still seems in catch-up mode in e-commerce. This fall, it is launching a marketplace allowing third parties to sell items on its website for delivery via its direct-to-consumer service, Kroger Ship. The service, similar to Walmart Inc.’s marketplace, aims to broaden the company’s product offering. Kroger has added time slots for grocery pickup and hired more employees to support a rise in online orders. But the chain has struggled to keep up with demand because its tech and workforce plans for pickup orders didn’t anticipate the current volume.

What All Of This Means For You

Being the person in the CIO position in the time of a pandemic makes a hard job dealing with the importance of information technology that much tougher. As a CIO one of our jobs is to be able to see into the future and both anticipate what is coming and prepare the company for it. However, there was no way for us to do that for the Covid-19 pandemic. Even CIOs that had been making plans to guide their companies into the future were caught off-guard by something that had never happened before.

The CIO of the Kroger grocery chain had been making significant investments in new technology in order to prepare for the future. However, its IT systems were overwhelmed when the pandemic hit. Kroger had been making IT investments in order to expand its e-commerce services. However, this ended up not helping it deal with the changes that were rapidly put in place by the pandemic. The pandemic has boosted Kroger’s sales, but other grocery stores have done better. Kroger still needs to adjust to more and more of its customers going online. Kroger has taken steps to make it easier to place online orders. Kroger is in the process of building automated fulfillment centers, but these are not operational yet.

The Kroger CIO has done a number of the right things However, with the arrival of the unexpected pandemic a number of holes in Kroger’s digital strategy have been revealed. The CIO now needs to identify the things are currently slowing the company down and make changes in order to eliminate those parts of the company’s new processes that are not serving them well. The good news is that the next time that a pandemic comes to town, Kroger should be more than ready to deal with it.

– Dr. Jim Anderson Blue Elephant Consulting –
Your Source For Real World IT Department Leadership Skills™

Question For You: How can the Kroger CIO make online ordering easier for customers?

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What We’ll Be Talking About Next Time

So what is the most important asset in the IT department? If you are like most CIOs, you’re instinctive answer to that question is “our people”. That’s a good answer; however, if we were to take a look at how the IT department goes about hiring people, I think that we’d discover a different story. Does your IT department spend its time going after candidates with low motivation and skip over other highly motivated candidates? If you want to find the best talent to fill your IT jobs, then things are going to have to change.

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