Here's why the Kroger Co. (KR) is expanding its Scan-Bag-Go technology in Cincinnati

Digital strategy is building customer loyalty

CINCINNATI - The Kroger Co. expanded its Scan Bag Go technology to 15 local stores this week, giving shoppers the ability to check out items with a hand-held wireless scanner in store aisles as they shop.

It’s the latest in a series of tech tools that Kroger is using to build shopper loyalty and boost market share.

“Scan Bag Go customers are extremely loyal,” said Brett Bonner, Kroger vice president of research and development. “Our goal is to give our shoppers an incredible experience so they want to return. That grows customer loyalty over time, which improves market share and enables us to reinvest even more in our people, products, shopping experience and lower prices.”

Kroger has been testing the technology in Cincinnati since 2011. This week, it added about a dozen stores to the pilot project.

Here are the stores that have scanners now:

Cold Spring, Ky

Loveland

Liberty Fairfield

Dent

Middletown

Cherry Grove

Mt. Washington

Amelia

Anderson

Goshen

Hyde Park

Madeira

Mariemont

Hillsboro

Mt. Orab

 

Bonner said the scanners were developed in-house to be compatible with other new tools, like the digital shelf edge technology that lets Kroger run full-motion video along with price tags and – eventually – send special offers to shoppers as they walk past an item.

“In the future, we see lots of opportunities to further integrate Scan Bag Go into digital shelf EDGE,” Bonner said. “The tech from Scan Bag Go also supports ClickList,” the online-ordering/in-store pick up system that Kroger is testing in five cities.

“It’s a great example of why Kroger owning this technology is a competitive advantage,” he said.

At an investor conference in New York this week, Kroger executives detailed how its digital strategy is engaging shoppers.

“We have over 17 million digital accounts now,” said Kevin Dougherty, group vice president in charge of Kroger’s digital and Vitacost units. “In some of our markets, greater than 20 percent of customers are using digital tools.”

Dougherty said Kroger is striving for a “seamless integration” of online and in-store technologies that let shoppers interact with the company on an ever-deeper level. Right now, for example, the Kroger app is used mainly as a discount tracker, sending relevant offers to customers by analyzing their buying behavior. In the future, Dougherty said the app will be customized “to deliver things like personalized meal solutions that provide for the menu needs of time-starved and nutritionally-sensitive households.”

So far, the strategy appears to be working, as CEO Rodney McMullen is telling analysts that Kroger has “gained meaningful share” in Cincinnati and Denver – two cities where digital strategies are rolling out quickly.

In Cincinnati, Kroger has learned the customers who use ClickList to order online end up visiting Kroger stores more frequently. In Denver, Kroger has seen some early success with a new website that offers home delivery of more than 36,000 natural and organic products to King Soopers customers.

Dougherty said both are examples of how Kroger is using digital strategies to build deeper relationships with customers.

Wolfe Research analyst Scott Mushkin said “market share opportunities abound” for Kroger in an Oct. 28 report that sets a 12-month price target of $50 for Kroger shares, which closed Thursday at $37.66.

“The company continues to invest in people, products, the shopping experience and prices, which is leading to significant market share gains,” Mushkin wrote.

For more on how shoppers are reacting to this new technology, watch 9 On Your Side today at 5:30.

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