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Kroger Inc.
Industry sector: Retail, grocery
Geography: USA
Service solution: Intelligent Queue Management
Project size: Over 2,300 locations

Organisation

Located in Cincinnati, Ohio, USA and established in 1883, Kroger has grown to
become the USA's largest grocery store chain, its second-largest general
retailer based on revenue and the world’s fourth-largest retailer.

Business Issue

A key component of Kroger’s business strategy is their ‘Customer First’
commitment, which is central to every decision they make. As part of this,
Kroger felt a better checkout service needed to be delivered to reward their
loyal customers and to differentiate them from the national discount chains,
and other regional grocers. Kroger therefore decided to move from a 1+2
service commitment (1 customer being served, 2 customers waiting) at the
checkout to a 1+1 service level. In deciding on this commitment, Kroger also
assessed the level of additional cashier labor that would be required in-store
to deliver 1+1.

Solution

Irisys met with Kroger in late 2007 and began trialing with their IS&S
Department in 2008 to prove the technology. Once the technology’s accuracy
and efficacy had been determined, Store Operations engaged in a 4 store trial.
Initial results showed that using the Irisys Queue Management system, Kroger
could deliver the required 85% 1+1 service level with the existing cashier labor
already scheduled. To prove the system further, Kroger progressed to a 19
store regional trial in Toledo, Ohio in Autumn 2009, where the results again
showed the Irisys system allowed them to achieve their desired improvement
in checkout service commitment, without deploying additional checkout labor.
Moreover, the response from customers in Toledo was extremely positive and
led to a noticeable improvement in customer satisfaction scores and uplift in
sales. As a result, Kroger successfully trialed in two further regions before
commencing a rollout to all stores in Summer 2010.

While there was a defined ROI measurement underpinning Kroger’s business
justification i.e. a single capital investment in the Irisys system versus an
ongoing revenue investment in additional cashier labor, the real driver behind
deploying the system was to improve checkout service; Kroger had identified
from its regional trial improvements in customer loyalty, shopping frequency
and overall customer spend, resulting in significantly increased sales. The roll
out of the system was accompanied by a marketing campaign both in-store
and on TV, radio and in print, advertising a ‘Faster Checkout at Kroger’.
Kroger has branded the system internally as ‘QueVision’ and began publicizing
its results during 2013.

Solution

Rodney McMullen, Kroger President and COO commented during Kroger’s 2nd quarter 2012 earnings conference call:

“Our market share gains are a result of our investments in all 4 keys of our
‘Customer First’ strategy. People often talk about investments we make in
price, but there are many ways we have invested in our non-price keys, people,
products and shopping experience, to strengthen our connection with
customers in our stores. For example, over the last several years, we've set out
to improve the shopping experience by reducing customer wait time at
checkout. Customers have told us they do not like waiting in long lines. Based
on that feedback, we developed a solution that has reduced the average
amount of time a customer waits in line to check out to about 30 seconds
today compared to around 4 minutes in the past. Our customers tell us they
noticed the difference, and we are delivering a shopping experience that
makes them want to return.”


Getting shoppers through checkout as quickly as possible is key to building
customer loyalty and reported by Kroger as one reason earnings were up 9.6
percent in the three months ending May 25, 2013 compared to the same time
a year ago. Kroger Chairman and CEO Dave Dillon cited “inspired, Customer
First service” for strong financial results including earnings of $481 million in
the quarter ending May 25 - the 38th consecutive quarter of profits for the
retailer’s continuously operating stores.


Marnette Perry, Senior Vice President of Retail Operations, stated:
"The technology enabled us to execute at the front of the store without that
additional [labor] expense. It's remarkable that we've been able to improve
execution as much as we have without a big price tag.”

“Nobody likes to wait in line. If we wanted to develop loyalty from our customers, we really had to respect their time and improve the checkout experience.” Since the technology was deployed, Kroger’s score on customer-satisfaction surveys has improved 42 percent on the speed of checkout, Perry said. “There are 7 million shoppers at Kroger stores today - we’ll save them 25 million minutes today,” she added.

And Kroger executives said they learned something surprising from
‘QueVision’ data that helped them boost certain orders. The system showed
that there were more customers than Kroger realized buying a small number of
items in the morning and during lunchtime, and that the express lanes were
backing up. So Kroger added 2,000 new express lanes to its stores nationwide,
which it credits with growing the number of those small orders over the last
two years.


Kroger cited additional benefits besides happier customers, for example the
technology has helped boost sales at smaller urban stores with limited space;
because customers get in and out faster, parking spaces free up quickly.
Surprisingly, the cost of staffing did not rise. Company officials had thought
they would need – and were willing to pay for – more cashiers if it shaved
customer wait time, but it turned out not to be necessary as the technology is
so smart, it makes scheduling more efficient.

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