Kroger Backs Driverless Grocery Deliveries
June 28 2018 - 9:50AM
Dow Jones News
By Heather Haddon
Kroger Co. is betting driverless cars can speed up the adoption
of grocery delivery in the U.S.
The largest U.S. supermarket chain by sales and stores on
Thursday said it would work with electric-vehicle startup Nuro Inc.
to test what they called the world's first driverless grocery
deliveries.
Kroger and Nuro executives said delivering groceries without
drivers would make such services cheaper and easier to introduce in
less densely populated parts of the country. Nearly a third of
4,504 adults surveyed by Forrester Analytics earlier this year said
they didn't do more grocery shopping online because those goods
often cost more.
"We are not trying to be a dollar cheaper than regular delivery.
We are trying to be an order of magnitude cheaper," said Dave
Ferguson, who helped lead Google parent Alphabet Inc.'s
self-driving vehicle arm before co-founding California-based Nuro
in 2016.
The Nuro partnership is the third deal Kroger has made in the
past two months that aims to aid in how it sells to customers as
competitors Amazon.com Inc. and Walmart Inc. move deeper into
online food retail.
Cincinnati-based Kroger last month took a $250 million stake in
British online grocer Ocado Group PLC to run automated delivery
warehouses and process digital orders. Kroger last week also closed
its acquisition of Home Chef to sell its meal-kits in stores and
online. On Wednesday, the company said it would nearly double its
digital staff to more than 1,000 by 2020.
Kroger Chief Executive Rodney McMullen said he was talking to
Nuro even before Amazon bought Whole Foods last year, ramping up
the e-commerce giant's move into food. Amazon or no, Kroger needs
to adapt to changing consumer habits, Mr. McMullen said.
"Technology is massively critical to our future," Mr. McMullen
said in an interview. "It allows us to serve customer better."
Industry analysts say digital grocery currently accounts for
roughly 2% of the $800 billion U.S. food retail market and many
expect that share to remain small.
Kroger and Nuro said the grocer isn't investing any money in the
partnership up front. Kroger could make an investment if it
succeeds, executives said. They wouldn't say where they will test
it first.
Nuro has raised $92 million in two funding rounds through
January to build a driverless vehicle prototype that features
locked compartments for groceries. The vehicle is about half the
width of a sedan and navigates with a network of cameras and radar
sensors.
After a customer places an order, Kroger employees would load
those groceries into the vehicle and dispatch it to a customer's
house or a pickup point. A shopper would use their phone or a code
to unlock the vehicle and take their groceries.
Nuro is testing its vehicles for now at a parking lot in
Sacramento and other private lots in California, Mr. Ferguson said.
The company is in talks with several manufacturers and expects to
begin mass production next year.
Deliveries are seen as an important potential market for the
growing list of companies working to develop driverless cars. Half
of more than 4,000 adults polled by the Pew Research Center last
year said they wouldn't want to ride in a driverless car, but
two-thirds said robots or drones would probably make deliveries in
cities in the future.
Domino's Pizza Inc. and Yum Brands Inc.'s Pizza Hut also are
exploring driverless vehicles for pizza deliveries. Startup
Robomart plans to deploy six driverless mobile grocery stores in
the San Francisco Bay area this fall.
Kroger last week said digital sales grew 66% during the
company's first quarter, bolstering an unexpectedly strong earnings
report. Kroger now offers two-hour delivery from more than 1,200 of
its stores, and it has set up some 1,165 pickup points for digital
orders.
Kroger has said its investments -- particularly a storewide
review of what products it stocks -- would likely hurt
profitability this year. And UBS analysts last week questioned the
benefits of the acquisition Home Chef given the up-to $700 million
price tag.
"They are investing an awful lot. I worry about that," said Bill
Bishop, co-founder of Brick Meets Click digital grocery
consultancy.
Kroger is expected to update shareholders on its business plans
on Thursday during its annual investor meeting. Kroger plans to
display a prototype of Nuro's driverless car at the gathering in
Cincinnati.
Write to Heather Haddon at heather.haddon@wsj.com
(END) Dow Jones Newswires
June 28, 2018 09:35 ET (13:35 GMT)
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