Robotic grocery baggers are spreading further across the country. Supermarket giant Kroger Co. plans to build an $89 million warehouse in southwest Phoenix that uses robots programmed with artificial intelligence to fulfill online grocery orders for its Fry’s Food Stores outlets in Arizona.
Kroger, the country's largest grocery store chain, is working with Ocado, a British technology company that develops software apps and equipment to operate online grocery ordering and distribution systems, to build the 222,850-square-foot customer fulfillment center, the companies said in a statement. Kroger and Ocado didn't say when they expect to break ground on the project, which may take two years to build.
The partnership points to an increasing trend by national grocers such as Albertsons as well as online and general retailers including Amazon and Walmart to open highly efficient robot-operated fulfillment centers. That lets them offer same-day delivery that shoppers in many parts of the country have come to expect, according to a report by Morgan Stanley retail analyst Simon Gutman.
In addition to the larger regional centers such as the one in Phoenix, Kroger and others are exploring the potential for “micro-fulfillment” centers with smaller footprints ranging from 10,000 to 20,000 square feet, with some as small as 5,000 square feet, Gutman said.
Kroger made one of the first big bets in robot fulfillment in 2018 through its partnership with Ocado, breaking ground on its first robot-operated customer fulfillment center in Monroe, Ohio near Cincinnati the following year.
Automated fulfillment centers can help grocers increase productivity and lower costs, and now, can also help with social distancing by reducing the amount of human workers who could be susceptible to catching or transmitting the virus.
The Fry's Phoenix location is expected to be one of as many as 20 automated customer fulfillment centers that Kroger expects to develop with Ocado, Kroger CEO Rodney McMullen said during an earnings call in December.
The company previously announced centers in Monroe, Ohio; Groveland, Florida; Frederick, Maryland; Atlanta, Georgia; Dallas, Texas; Pleasant Prairie, Wisconsin; and Romulus, Michigan, with future sites to be determined in the western and northwest United States. The Ohio and Florida centers are expected to open this year.
Kroger operates 123 Fry's and Smith's food stores and three manufacturing and distribution centers employ more than 19,000 workers in Arizona, according to the company's website.
Traditional grocery stores like Kroger are scrambling to keep up as tech giant Amazon rolls out its Amazon Fresh outlets as part of its $13.7 billion purchase of Whole Foods three years ago.
Kroger and other large chains including Albertsons, Costco, Walmart and numerous other players have ramped up their online and brick-and-mortar presence to compete for market share in the country's $656 billion grocery industry, with the task taking on new urgency since the coronavirus pandemic ignited a dramatic increase in online shopping last year.
E-commerce growth during the pandemic has benefited industrial districts such as Phoenix's Buckeye Road area, where demand for warehouse and distribution space has been robust and performed well, according to CoStar Market Analytics.
The automated center in Phoenix could create as many as 700 jobs in transportation, warehousing, robotics, technology and other fields in its first five years of operation, Phoenix Mayor Kate Gallego said in the statement. Kroger bought 57.3 acres 91st Avenue and Buckeye Road for $13.7 million from an affiliate of Irvine, California-based commercial builder McShane Development.