Kroger (NYSE: KR) has had a difficult time breaking boundaries of late, particularly because it has failed to evolve technologically in an economic environment that thrives on e-commerce.
Historically, Kroger has maintained a traditional, home-style approach to conventional grocery shopping, holding back from investing in technological improvements like its contemporaries have, instead focusing on expanding in-store sales.
As a result, executives who have invested in the business are maintaining a tighter grip on their money. Some of its technology partners actually prematurely exited a meeting earlier in protest, owing to the companies' intransigence with respect to change.
CEO Rodney McMullen acknowledges the problems his company has been facing, but also believes it will improve moving forward: "We've got to get our butts in gear," he said in an interview. "There was no doubt we were behind."
What's more is that Kroger has been very inactive in the M&A department, unlike its rivals, failing to acquire or work with potentially helpful startups. In fact, initially, Kroger was interested in online grocery delivery service Shipt, meal kit company Plated, and bulk e-tailer Boxed.com. However, it ultimately never ended up solidifying these deals. Shipt was acquired instead by competitor Target in 2017.
In terms of tech integration, although Kroger acquired Vitacost, an online seller of natural foods and supplements, for $280 million in 2014, it did not fully avail itself of Vitacost's technology. When Vitacost's employees suggested using email promotions instead of paper circulars, Kroger didn't follow through.
"Most of us, when we say the digital world, automatically conclude that e-commerce is where everything is going," Kroger 2013 CEO David Dillon told investors. "I don't draw that same conclusion." There has thus clearly been a longstanding trend of Kroger avoiding technological change, the disadvantages of which are beginning to show in the present day.
Even so, some remain optimistic. John San Marco, a research analyst at Neuberger Berman, said: "Kroger is in the very early innings of a business transformation," he said. "This isn't a one and done."
Indeed, the company is beginning to invest more heavily in technology, including robotic delivery, curbside pickup, smart stores, click and collect options, and advanced in-store camera systems. Although it's late to the party, Kroger could still catch up to its rivals.