Kroger is taking on H-E-B and Walmart in San Antonio without stores. How’s that going?

Ocado robots at work in a Kroger hub facility. A hub in Dallas serves spoke facilities in San Antonio and Austin, from which Kroger staffs deliver to customers in a 90-mile radius.Inside a 70,000-square-foot warehouse near Interstate 35 and Loop 410, Kroger employees roll bins with eggs, milk, cereal, paper towels and vegetables out of semitrailers.

Kroger is betting such “white glove” delivery service will build its customer base in San Antonio and other markets where it has no brick-and-mortar stores. But while the company’s system appears to be seamless, it’s unclear to what degree it’s making inroads in San Antonio — or against homegrown heavyweight H-E-B or global giant Walmart, which are also pushing hard into delivery and e-commerce.

“Obviously, there’s a lot of competition out there” he said. “But we have seen week-over-week growth since we’ve started and it’s not gone down at all. It’s only gone up. We’re happy with where that’s trending right now and expect that to grow as we move into our second year.”The San Antonio warehouse, which operates as a “spoke” with the Dallas “hub,” is a result of Kroger’s partnership with British technology company Ocado Group.

Kroger executives say customers want multiple options: to shop at stores and order items for curbside pickup or delivery. They are focusing on freshness, affordability, using data to make personalized recommendations and expanding the company’s lower-priced private label brands, especially as inflation remains high, CEO Rodney McMullen said during a fourth-quarter earnings call with analysts.

But even without building stores, stocking and staffing them, the costs of entry are significant, said Neil Saunders, managing director of the retail division at GlobalData, a London-based data analytics and consulting company. “This model does present a brand awareness challenge,” Spieckerman said of going delivery-only. “In the absence of stores, Kroger may not be top of mind with shoppers in some areas. The company will need to invest heavily in promotion initially to get the ball rolling in store-less markets.”

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