Kroger cans costly robots, cashes in on data—and finally delivers e-commerce profits
The gist
Kroger just canned its costly robot warehouses, doubled down on data-driven retail media, and finally turned its e-commerce business profitable—proving agility beats automation in the race for grocery dominance.
What to know
- Kroger axed half of its automated Ocado fulfillment centers, saving $400 million and shifting to more nimble, store-based e-commerce fulfillment.
- E-commerce finally became profitable in early 2026, thanks to partnerships with Instacart, Uber, and a laser focus on retail media revenue.
- Kroger Precision Marketing raked in $1.5 billion in 2025 by leveraging loyalty data from 95% of transactions—fueling record omni-channel profits and 19% e-commerce growth.
From Robots to Retail Agility
Kroger’s $400 million pivot from automated warehouses to store-based fulfillment slashed costs and unlocked a nimble, profit-focused e-commerce model.
Kroger's strategic decision to scale back its partnership with Ocado marked a pivotal shift in its grocery e-commerce fulfillment approach. By halting expansion plans for Ocado’s automated Customer Fulfillment Centers and closing nearly half of the underperforming warehouses, Kroger not only streamlined operations but also unlocked significant cost savings, with closures expected to save around $400 million. This move away from capital-intensive fulfillment centers toward more flexible, store-based fulfillment models reflects a broader recalibration aimed at improving efficiency and profitability.
The transition to store-based fulfillment has been instrumental in transforming Kroger’s e-commerce business from a cost center into a profitable venture. As Kroger’s leadership highlighted, this shift has improved the economics of the business at scale, contributing directly to the e-commerce segment—including retail media—turning profitable in early 2026. Leveraging local stores for order fulfillment not only reduces overhead but also enhances agility, positioning Kroger to sustain and build on its newfound profitability amid ongoing cost pressures.
Data-Driven Profits Take Center Stage
Leveraging loyalty data from nearly every transaction, Kroger’s retail media arm transformed customer insights into a high-margin engine fueling e-commerce gains.
Kroger’s strategic pivot away from expanding Ocado’s Customer Fulfillment Centers towards partnering with third-party delivery services like Instacart and Uber has been a game-changer, delivering an estimated $400 million in cost savings. This shift not only streamlined fulfillment logistics but also enhanced profitability by leveraging established delivery networks rather than investing in costly infrastructure. As Greg Foran highlighted, this move, combined with Kroger’s retail media initiatives, helped the e-commerce business turn profitable by early 2026, marking a significant step forward in their digital transformation.
At the heart of Kroger’s e-commerce profitability lies Kroger Precision Marketing, a high-margin retail media arm that monetizes over two decades of rich first-party customer data. With 95% of transactions linked to loyalty cards, Kroger offers advertisers unparalleled insight into actual purchase behavior, making its platform highly valuable for brands seeking measurable impact. This integration of retail media with e-commerce operations has created a sustainable model that not only drives incremental revenue but also fuels Kroger’s ambition to outpace market growth in the digital grocery space.
Omni-Channel Shoppers Boost Margins
With omni-channel customers spending 2.5 times more than in-store-only shoppers, Kroger’s integrated data and delivery strategy powered record profitability despite inflation.
Kroger's e-commerce profitability in 2026 marks a significant turnaround driven by a strategic overhaul that includes cutting $400 million in costs from closing unprofitable Ocado fulfillment centers and leveraging high-margin alternative profit streams like Kroger Precision Marketing. This retail media arm capitalizes on deep first-party data from 95% of transactions linked to loyalty cards, generating $1.5 billion in operating profit in 2025 and providing a robust financial cushion amid inflationary pressures.
Despite persistent cost pressures and inflation, Kroger’s broader company profitability underpins the e-commerce business’s sustainable growth, with adjusted FIFO operating profit rising to $4.9 billion in 2025, fueled by sourcing efficiencies and supply chain improvements. CEO Greg Foran highlights that omni-channel customers spend nearly 2.5 times more than in-store-only shoppers, reinforcing the strength of Kroger’s integrated retail footprint and data-driven approach as key enablers of margin expansion and reinvestment in customer experience.
The shift to store-based fulfillment has been pivotal in improving Kroger’s e-commerce economics, allowing the business to scale profitably with a 19% year-over-year revenue growth led by delivery services. Foran emphasizes that this operational pivot, combined with retail media revenue, has propelled e-commerce into profitability for the first time, marking a sustainable step forward despite ongoing inflation and cost challenges.
