Kroger reducing customer wait time in checkout lanes, cutting prices in effort to increase competitiveness versus Wal-Mart; goal is to keep prices low and increasing the amount of money shoppers spend at Kroger

Cindy Allen

LOS ANGELES , February 15, 2012 (Industry Intelligence) – In an effort to boost its competitiveness against retailers such as Wal-Mart Stores Inc., the largest seller of groceries in the U.S., Kroger Co. has reduced customer wait time in checkout lines and has reduced prices, Reuters reported Feb. 14.

On Feb. 14, Kroger Chief Financial Officer Mike Schlotman said that, excluding money spent on food at restaurants, Kroger’s best customers spent roughly 50% of the total amount of money that they spend on food at Kroger’s, adding that this rate has recently risen approximately 1 percentage point per year.

Schlotman has said that his goal is to make prices “good,” but that the company cannot pledge to make prices “great,” particularly as Kroger cannot force suppliers to lower their prices.

For the last several years, Kroger has been focusing on keeping prices low and increasing the amount of money that shoppers spend at its stores in relation to what they spent on similar products at other stores.

Kroger Chief Executive David Dillon said that, in contrast to the chain’s efforts in the 1990s to please their shareholders, efforts that reduced in a loss of relevance to consumers, Kroger is focusing on the total volume of goods sold as a means of increasing revenue. Analysts on Wall Street, who prefer to see faster improvement in stores’ margin rates, tend to be less than keen when it comes to this type of model.

Schlotman indicated that, rather than attempt to keep its gross margin rate flat, Kroger’s is focusing on attempting to keep its gross margin dollars flat.

In an effort to reduce wait times at checkout, he added that Kroger has begun scheduling more employees to work in the checkout lines during peak shopping times, and have installed television screens at approximately 2,200 stores.

The television screens display a series of three numbered balls, and the code tells employees how many people should be working the checkout lanes, Schlotman said.

Schlotman said that the moves had been so effective that improvements in wait time at checkout in a majority of stores can be measured in seconds instead of minutes.

The primary source of this article is Reuters, London, England, on Feb. 14, 2012.

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