Kroger’s (KR) Digital Coupon And App Business Doing Well: Wall Street Analysts

 @natrudy
on September 13 2013 3:09 PM
A variety of Kroger branded foods
A variety of Kroger branded foods are arranged on a shopping cart at a King Soopers grocery store in Broomfield, Colorado Reuters

This story has been updated.

America’s largest food grocer, The Kroger Co. (NYSE:KR), is pushing digital boundaries hard, according to bank analysts reviewing the company’s quarterly earnings from Thursday.

On its earnings call, the company revealed that its shopping app is in the top 2 percent of Apple Inc. (NASDAQ:AAPL) app downloads.

Kroger also communicates regularly with about 9 million households through the app. Notably, each of the 9 million users receives unique digital coupons based on their shopping behavior.

“It used to be I would get a long, long laundry list of coupons that were available to download. And now, they’re in the order of priority based on my actual shopping,” said Kroger CEO David Dillon during the call.

Kroger has grown the number of its customers who use digital coupons by “huge” triple-digit percentage increases over the past several months, said company executives.

According to retail consultancy Brick Meets Click, retail shopping apps are abundant in the market. Some are advanced enough to locate shoppers indoors, track shopping lists, and even offer ads in real-time, so consumers modify their shopping lists mid-trip to take advantage of enticing deals.

Kroger’s app can also help customers refill prescriptions and create shopping lists. They update the app roughly every six weeks.

The app is rated only 2.5 stars on average, however, in the iTunes store.

Barclays (LON:BARC) food retail analysts described Kroger’s digital capabilities as “promising” on Friday, in a research note.

“KR [Kroger] has been an innovator in the supermarket industry and has been quick to react and respond to change,” they wrote. "[Kroger]’s digital efforts are well beyond the experimental stage…The innovation in digital has been continuous.”

“The digital program is leveraging a very well-established direct mail program; it’s not being built from scratch,” wrote Barclays analyst Meredith Adler to IBTimes in an email.

It’s unclear how successful digital apps and coupons are for other major food retailers, like Wal-Mart Stores, Inc. (NYSE:WMT) or Safeway Inc. (NYSE:SWY), though Adler cited anecdotes from industry sources about the superiority of Kroger’s program over Safeway’s.

Kroger’s digital strength is partly based on its work with Dunnhumby, a data research firm it partly owns, along with UK supermarket giant Tesco PLC (LON:TSCO).

“Dunnhumby’s ability to personalize the promotional offers is very powerful,” wrote Adler. “I believe all marketing will eventually move towards personalization.” 

Making the full-blown transition to selling groceries online, however, as has been the buzz with Amazon.com, Inc. (Nasdaq:AMZN) this summer, probably isn’t in Kroger’s future, wrote Citigroup Inc. (NYSE:C) analyst Deborah Weinswig in a note.

“Management believes that over time, online grocery will be complementary to in-store shopping, not a replacement,” she wrote. 

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