Kroger is the largest supermarket in the US by revenue, raking in $132.5 billion in sales, and is also the second-largest general retailer after Walmart.
If you wish for greater insight into Kroger’s SWOT analysis, read on to understand its strengths, weaknesses, opportunities, and threats!
What is Kroger’s SWOT Analysis In 2022?
Kroger’s SWOT analysis highlights its strengths, for instance, the use of different store formats to help consolidate its market share and propel growth in 2022. Also, the analysis reveals weaknesses such as indebtedness that hinder growth. However, the analysis also shows the extraneous factors of opportunity and threats that can hinder Kroger’s growth.
Keep reading through Kroger’s SWOT analysis for more details, particularly its strengths, weaknesses, opportunities, and threats!
What are Kroger’s Strengths?
Kroger’s strengths comprise resources at its disposal and capabilities derived from established internal structures, policies, and strategies.
These strengths give Kroger a competitive edge in consolidation and expansion of market position.
Currently, the following are Kroger’s strengths:
- Private label brands
- Variety of store formats, plus product diversification
- Economies of scale from large store base
- Strong brand name
- Experience at effective acquisitions and merging complementary firms
1. Private Label Brands
Almost all major players in the grocery industry are relying more than ever on private brands to sustain them and fuel growth.
Private brands offer higher profit margins, since the retailer exercises close control over production costs.
Kroger’s focus on store-owned brands is part of a change in its food retailing model, targeting customers interested in healthy food over brand name products.
Its plant-based line Simple Truth, with over 1500 products, has reached $3 billion in sales, making it the largest natural and organic-based brand in the US.
This growth is fueled by steady investment in store-owned brands by Kroger since it launched in 2012 and now brings in over $20 billion in sales.
2. Variety of Store Formats Plus Product Diversification
Kroger offers its products in 4 formats; supermarkets, multi-department stores, price impact warehouse stores, and marketplace stores.
Under these, it offers a range of products from groceries to apparel and jewelry to gas in its one-stop supermarket fuel centers.
The main reason for this variety of store formats and product diversity is positioning the retailer to cater to every taste and purchasing ability.
Kroger segments its customers by purchasing ability into high, medium, and low, and curates and analyses consumer data from the stores to improve the selection of products it offers in the various stores.
Overall, this strength has been vital to Kroger capturing different market segments and maintaining its position.
3. Economies of Scale From a Large Store Base
In a competitive retail sector, most players try to differentiate their products on pricing.
Therefore, they must keep their costs very low to offer lower prices.
One of the ways in which Kroger manages its costs is by economies of scale from its large store base.
With over 3,240 stores operating under the Kroger brand over most of the country, the retailer is the second-largest retailer in the US.
Kroger has been able to compete favorably on price, even with market leaders like Amazon’s Whole Foods, because of the economies of scale it enjoys.
4. Strong Brand Name
Kroger’s brand aims to make customers feel safe when shopping with it. It promises to put honesty, integrity, and the human soul’s warmth before money.
This accounts for the blue brand color, meant to reflect these values and arouse the customer’s sense of trust and security.
Kroger’s offerings, especially in-store owned brands, try to reflect that promise, billing its farm and food products as fresh and healthy.
The company’s plant-based line is aptly named “Simple Truth,” and is already raking in record sales and leading the market.
5. Experience at Effective Acquisitioning and Merging of Complementary Firms
Acquisitions and mergers are, to an extent, responsible for Kroger’s impressive growth and market position.
Kroger has been able to increase its outlet footprint and product range, as well as expertise through an astute merger and acquisition strategy.
The strategy consists of going after entities already in the market to reduce risk and initial overhead costs, such as advertising.
Kroger focuses on what physical, human and intangible resources potential merger candidates have to offer and financial and non-financial attributes.
Ultimately, the consideration is sufficient synergy to enhance the delivery of Kroger’s value propositions to the customer.
What are Kroger’s Weaknesses?
Kroger’s weaknesses are internal to the organization. They stem from inadequacies, misapplications, unintended structures, strategies, or policies.
Weaknesses undermine the company’s ability to hold onto and expand its market share.
Listed below are Kroger’s weaknesses:
- Inefficient cost management
- Limited geographic presence
- Lesser online capabilities compared to competitors
1. Inefficient Cost Management
Kroger has experienced an increase in its revenues from sales but has unfortunately lost much of that to theft, supply chain costs, and inflation.
The company blames organized crime for part of the 25% shrinkage in profit margin attributable to inventory loss.
Theft has been rampant across the industry and targets high value yet easy to move items such as jewelry, and takes the form of employee and vendor theft and shoplifting.
Unexpected economic upsets also caused supply chain constraints, and overburdened supply lines by demand.
These constraints led to increased costs, as Kroger paid more for transportation and warehousing.
As a result, it had to pass some of the cost to the consumer. As a result, stock value fell by as much as 9%.
2. Limited Geographic Presence
Kroger is the second-largest retail store in the US, with over 3000 stores.
However, these outlets are distributed in less than 40 states. In addition, Kroger has no presence abroad, unlike its major competitors.
This lack of diversification is a weakness that hinders Kroger’s ability to survive economic upsets, more so if they’re localized.
Diversification allows a firm to balance out bad performance from a region with another less afflicted region.
3. Limited Online Capabilities Compared to Competitors
Kroger’s foray into the online purchases space is only recent and, as a result, lags way behind its competitors.
A large portion of all purchases are increasingly being made online, and early adopters are reaping big, in some cases achieving unassailable leads.
Kroger trails in 9th position in online sales in a year of record online purchases, despite having the most considerable sales revenue of any grocery in the US.
What are Kroger’s Opportunities?
External factors in the business environment create opportunities for companies like Kroger as long as they’re prepared.
Opportunities offer conditions conducive to growth at lower than normal levels of investment.
Listed below are Kroger’s opportunities:
- Increase in online purchases
- Changing grocery consumer trends
- Strategic Partnerships
1. Increase in Online Purchases
The future of retail is online shopping. For example, 14% of all retail sales are made online, and about 45% are completed in-store.
Roughly 70% of Americans have shopped online, and 25% shop at least once a month. The average American will spend $1,804 online annually.
This is a market too large to ignore, and competitors are already establishing an advantage- 47% of all online purchases go to Amazon, worth over $250 billion.
Kroger’s inroad into the online shopping space is already paying off, but there’s still much ground to be won.
It should invest in digital and physical resources to compete for the online market to enhance its ability.
2. Changing Grocery Consumer Trends
Today’s shopper values quality and convenience above price. There is a particular trend toward a preference for fresh produce.
In addition, 60% prefer fresh meat, fish, milk, and seafood, and 67% go out of their way for healthy ingredients.
This shopper is less loyal and will not tie themselves to a brand out of sentimentality, which is ideal for pursuing a better proposition.
Kroger has a superb opportunity that ties in with its commitment to providing fresh food under store-owned brands.
3. Strategic Partnerships
Market leaders in the retail sector, especially online, have opened up such a massive lead that the only way to beat them is to combine.
There are many firms within and beyond the retail sector with whom it would be mutually beneficial for Kroger to combine.
What are Kroger’s Threats?
Threats to Kroger result from external factors that make it difficult for the company to do business and slow down its progress.
These are Kroger’s threats:
- Unforeseen cataclysmic events
Kroger has faced competition in all aspects of its value proposition and strategy.
Almost all major retailers are making a substantial investment in store-owned brands for their better profit, so much so that it’s not much of a competitive edge.
Similarly, the competition for online business is stiff, particularly with early adopters who have made up so much ground.
The entry of hard discounters into the fray also challenges Kroger’s price proposition, forcing it to cede market share or lower prices dangerously low.
2. Unforeseen Cataclysmic Events
Unprecedented events like wars, pandemics, and economic slumps are an existential threat to many unfortunate businesses.
For Kroger, such events can constrain its logistics and make doing business expensive, pushing up prices or eating into profit.
Kroger’s SWOT analysis shows where the most significant growth potential lies. It’s an excellent reference tool for strategic planning and seeking out areas of improvement.
The SWOT analysis is critical in identifying strengths and opportunities to leverage in the war against competition and assess market readiness for a new product.