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Kroger augments mobile expertise with Vitacost buyBy
Kroger Co. will add to its mobile-commerce know-how through the acquisition of Vitacost, an online-only retailer of consumable health products.
Boca Raton, FL-based Vitacost operates an ecommerce website and has a mobile app geared toward commerce. Kroger, based in Cincinnati, had previously not made a big push into ecommerce, and has been using mobile primarily as a means of distributing coupons and offering other services, such as shopping-list creation, to its customers.
“We have been thoughtful about our approach to building our digital and e-commerce capabilities,” said J. Michael Schlotman, chief financial officer at Kroger Co., in a conference call following the announcement of the acquisition. “Today, millions of customers plan their shopping online using Kroger’s cloud-based shopping list and weekly ad through the company’s mobile apps and Kroger.com, and more than one billion digital coupons have been downloaded since 2009.”
Kroger also has been piloting an online ordering and delivery service through its King Soopers chain in the Denver market. It acquired additional expertise in online grocery through the acquisition last year of Harris Teeter, a Matthews, NC-based supermarket chain that operates the Express Lane “click-and-collect” online ordering model with store pick-up.
Buying mobile expertise
Vitacost, which said it has about 2.3 million customers, brings to Kroger extensive expertise in mobile commerce. Its assets include proprietary ecommerce technology and ship-to-home fulfillment centers in Las Vegas and Lexington, NC.
It also has a sophisticated mobile app that allows shoppers to browse its entire inventory of 45,000 health and wellness products.
In the first quarter of 2014, Vitacost reported that its mobile sales volume increased 57 percent year-over-year to 13 percent of total volume. The company also released a new version of its mobile site in the first quarter and a new version of its mobile app in June.
Some of the enhancements made to the mobile-shopping app included an improved checkout experience and better customer-service capabilities. Last year the company also rolled out a tablet-optimized Web site (see story).
Through the app or the tablet-optimized site, consumers can shop from a variety of categories such as vitamins and supplements, sports and fitness, herbs, diet, beauty and personal care, baby, food, professional lines and medicine cabinet items.
In addition, customers can shop by specific brands and sort their search by top-selling items, new items, ratings and price.
The e-grocery dilemma
The acquisition of Vitacost still does not solve the biggest dilemma bricks-and-mortar food retailers face in going digital — the delivery of fresh foods. While products such as vitamins, supplements and other shelf-stable goods like those offered by Vitacost are relatively easy to warehouse and ship, fresh product presents many more challenges along the supply chain.
In addition, consumers have been hesitant to embrace online ordering of fresh product online.
“Delivering fresh product and those kinds of items is a difficult formula to get right,” Mr. Schlotman said. “That is why we have had what we are doing in Denver for so long and have not expanded it. We keep learning from that, but we have not solved the formula for that in the Denver market, which is why we have not expanded it outside that market.”
Mark Hamstra is content director at Mobile Commerce Daily
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