Kroger Co. has announced plans to close three automated fulfillment centers built with Ocado Group technology, located in Pleasant Prairie, Wisconsin; Frederick, Maryland; and Groveland, Florida. The decision is part of a strategic move to optimize costs, improve operational efficiency, and enhance e-commerce profitability.
The company will pivot from large-scale automation to a hybrid fulfillment model, emphasizing store-based fulfillment and partnerships with third-party delivery platforms. By leveraging services from partners like Instacart, DoorDash, and Uber Eats, Kroger aims to maintain fast, reliable delivery for its online shoppers while reducing the high costs and complexity associated with fully automated distribution centers.
This strategic shift comes as Kroger faces pressures on e-commerce profitability despite continued growth in online orders. Large automated centers, while technologically advanced, have proven expensive to operate and may not offer the flexibility required to respond to rapidly changing consumer demand. The new model allows Kroger to combine the reach and convenience of physical stores with the scalability of third-party logistics, enabling faster and more cost-effective order fulfillment.
Analysts suggest that this move reflects a broader industry trend among major retailers: balancing automation with agility. Retailers are increasingly evaluating where technology investments add real value and where partner networks and store assets can deliver better customer experiences and improved margins. For Kroger, the goal is to streamline operations, enhance delivery speed, and strengthen profitability while adapting to the evolving expectations of online grocery shoppers.