Kroger acknowledges that its bet on robotics went too far

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Kroger’s Nov. 18 announcement that it will shut down three of its e-commerce robotics facilities marks a sharp turnaround for the grocer, which until recently had expressed confidence in its ability to use automation to run a profitable online grocery business.

Less than a year ago, Kroger said it planned to expand the fleet of high-tech fulfillment centers it is developing in partnership with UK-based warehouse automation company Ocado. And in mid-2024, Kroger revealed it will install new technology from Ocado to improve warehouse efficiency.

When Kroger began its partnership with Ocado, the company “believed in a relentless drive for pre-market innovation to delight our customers and advance our position as one of America’s leading e-commerce companies.”

However, Kroger’s predicted confidence comes despite questions being raised about whether the Ocado network will live up to expectations.

Kroger revealed in September 2023 that it had decided to halt development of the Ocado project as it waited to see if the sites it had already launched met performance criteria.

In another sign of its faltering strategy, Kroger announced last March that it was closing three blade centers that run alongside several of its robotics centers, with a spokeswoman noting that the facilities “did not meet the criteria we set for success.”

By September 2025, it was clear that depending on automation as the foundation of a money-making grocery delivery business probably wasn’t going to work out for Kroger. Kroger’s interim CEO Ron Sargent, who took over in March after McMullen’s abrupt departure following an ethics investigation, said on an earnings call that the company would conduct a “full site-by-site analysis” of the Ocado chain.

Sargent also said Kroger will focus its e-commerce efforts on its fleet of more than 2,700 grocery supermarkets because it believes its stores provide a way to “reach new customer segments and expand express delivery capabilities without significant capital investment.”

Kroger said on Nov. 18 that its decision to close three robotics facilities, along with other adjustments to its e-commerce operations, will add $400 million as it seeks to improve e-commerce profitability. But course correction is expensive, forcing Kroger to spend about $2.6 billion.

Ken Fenio, a former Kroger executive who now advises retailers on technology as a managing partner at Pine Street Advisors, said the changes Kroger is making reflect the broader reality that grocery e-commerce has not reached the levels the industry predicted when the Covid-19 pandemic boosted digital sales.

Fenyo added that Kroger’s decision to locate Ocado centers outside cities was a key flaw.

“Ultimately these places were hard for this model to work,” Fenio said. “You didn’t have enough people to order, and you had a fair amount of driving distance to get the orders to them. “So in the end, these big centers weren’t processing enough orders to pay for all that technology investment you had to make.”

With its automated fulfillment network, Kroger is betting that consumers are willing to trade speed of delivery for reasonable prices on grocery orders. This model has been very successful for Ocado in the UK, but American consumers have shown they value delivery speed, with companies like Instacart and DoorDash expanding rapidly in recent years, offering services such as 30-minute delivery.

Acknowledging this fact, Kroger noted that it is deepening partnerships with third-party delivery companies. The grocer also said it will test “capital-based automation and stores in high-volume markets” — a sign of the kind of micro-fulfillment technology grocers have experimented with in recent years, which Amazon is currently testing at a Whole Foods Market store in Pennsylvania.