Kroger Opens Ghost Grocery Store in Florida

The grocer doesn’t have any physical locations in the state and rivals regional favorite Publix.

November 08, 2021

Kroger Grocery Store

ALEXANDRIA, Va.—Kroger has opened a ghost grocery store in Florida, reports CNBC. The grocer has opened a large warehouse operated by robots and uses delivery drivers that drop off online grocery orders at people’s doors. Kroger invested $55 million just on construction of the warehouse alone and has hired 900 employees.

Kroger and British online grocer Ocado partnered three years ago to build fulfillment centers across the U.S., which Kroger calls sheds. Kroger has opened two sheds so far with plans for nine more over the next two years.

The move by Kroger is the grocer’s attempt to capitalize on the e-commerce side of grocery, which largely increased during the pandemic and has not decreased.

“Every time that it [the retail industry] transitions, there’s going to be winners and losers,” Kroger CEO Rodney McMullen said in an interview with CNBC. “And all you have to do is be the one that’s in front of that trend change. And once it’s obvious, it’s too late.”

Kroger has fierce competition in Florida with regional grocer Publix having a loyal customer base and offers third-party grocery delivery via Instacart. Kroger doesn’t have any stores in the state, so its attempting to win over customers in a brand-new market where some may not even know its name. The Kroger vans serve as giant billboards, signaling the grocer’s arrival in Florida.

Florida’s population has increased by 14% from 18.8 million in 2010 to 21.5 million in 2020, according to the U.S. Census Bureau. The CEO says that with many people migrating to Florida, some have moved from other states where the grocer is already a household name. A Kroger delivery driver told CNBC that sometimes people will ask her at stoplights where the nearest store is so they will hand them a business card.

McMullen told CNBC that Kroger’s online-only offering helps it stand apart. “If you go in with just physical stores, how do you distinguish yourself between what’s already there?” he said. “By going into the market with a shed, it’s really offering something that’s not offered in the same way today.”

Kroger Delivery’s service fee starts at $6.95 per delivery, on top of grocery charges. Florida customers can sign up for Kroger’s Delivery Savings Pass, an annual subscription service that costs $79 for unlimited delivery. Kroger also offerings $15 discounts off of the first three orders for new customers.

Online grocery orders now drive 12.3% of all grocery sales versus 1.8% pre-pandemic, according to the polling done by Brick Meets Click/Mercatus. That translates to $8 billion of roughly $65 billion in monthly grocery sales. Online grocery shoppers placed an average of 2.76 orders in September—a higher and more stable number than a year ago, its surveys said.