Kroger to Grow Last-Mile Network

Kroger Spoke Facility. Image courtesy of The Kroger Co.

The Kroger Co. continues to expand its e-commerce offerings through the growth of its hub-and-spoke network with the announcement of the planned addition of three new last-mile centers that will total 187,000 square feet. The company will open a spoke facility in Austin, Texas, and San Antonio, as well as one in Birmingham, Ala., marking the entrée into three new territories.

Kroger, the largest grocery retailer in America, created the hub-and-spoke delivery network to serve customers without relying on its traditional brick-and-mortar stores. The Kroger Fulfillment Network and the U.K.-based tech firm Ocado Group power the network. The concept is based on highly automated fulfillment centers, or hubs, that utilize bots and air-traffic control systems to systematically gather orders to be distributed to spoke sites, where associates then collect orders to be shuttled away for delivery.

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“The hub-and-spoke model allows us to extend the range of our [customer fulfillment centers], allowing us to serve more customers incredible products directly to their door. And we are just getting started,” Rodney McMullen, CEO of The Kroger Co., said just nine months ago during the company’s first quarter 2021 earnings call on June 17, 2021.

In Texas, Kroger will lease space in Austin and San Antonio to serve as spoke facilities. The Austin property will be a 70,000-square-foot, cross-dock facility, and the San Antonio property will be a cross-dock facility as well, spanning 67,000 square feet. Both lease agreements are pending finalization. Ultimately, the Austin and San Antonio spoke facilities will collaborate with Kroger’s Dallas hub.

In Birmingham, Kroger will open its spoke facility in 50,000 square feet of leased space at a cross-dock property at 30 W. Oxmoor Road. The Birmingham site will collaborate with the Atlanta-area hub in Forest Park, Ga. While Kroger has 10 brick-and-mortar retail stores in the north and east portions of Alabama, it doesn’t have a single store in metropolitan Birmingham.

Old company, new thinking

Kroger opened its first store in 1883, but the grocer has not gotten stuck in the past; it’s more forward-thinking than some. And the company has wasted precious little time expanding its hub-and spoke system since announcing its exclusive partnership with Ocado in 2018 to embark on the creation of a delivery network combining artificial intelligence, advanced robotics and automation.

Kroger opened its very first customer fulfillment center in April 2021 with the debut of a $55 million, 375,000-square-foot facility in Monroe, Ohio. And the grocer entered the state of Florida with the launch of e-commerce delivery and the opening of a 375,000-square-foot customer fulfillment center in Groveland in June 2021. And just last week, on March 2, Kroger announced plans for a second customer fulfillment center in Ohio. The 270,000-square-foot hub facility will be located in the Cleveland area.

The new spoke facilities in Austin, San Antonio and Birmingham are all scheduled to come online later in 2022. Kroger expects to open an additional 17 new hub and spoke facilities over the next 24 months.