Kroger launches autonomous delivery in Houston.

by Dave Hanson

In late 2018, Kroger partnered with autonomous vehicle manufacturer Nuro to offer grocery delivery to residents of Scottsdale, AZ. Now Kroger is taking their first big step coming off the successful pilot program, expanding autonomous vehicle grocery delivery to the United States’ 4th largest city, Houston, TX.

Kroger operates 102 stores in the Houston market, and has chosen its locations at 10306 South Post Oak Road and 5150 Buffalo Speedway as the first stores to offer the service. The stores will start by offering delivery via Nuro’s self-driving Toyota Prius vehicles, which are manned with a human backup driver. Assuming there are no hiccups early on, the program will take the next step later this year, switching to Nuro’s completely unmanned R1 autonomous vehicle.

This represents a fairly significant step in the grocery vertical, as delivery service is one of the fastest growing revenue streams for grocers. Customers are increasingly turning to the convenience of online grocery ordering, and experts predict a year-over-year growth rate of 18%, with online orders projected to reach nearly $30 billion in 2021. Kroger has been especially successful in this realm, seeing digital sales climb by a whopping 58% in 2018.

Kroger’s partner, Nuro, was founded in 2016 by two former Google engineers who have focused their entire business specifically on autonomous delivery vehicles. Though the company is still fairly new, their self-driving R1 has generated a lot of excitement from both potential clients and investors in the technology space. After raising nearly $100 million in venture capital financing last year, Nuro announced a massive $940 million investment from Japan’s SoftBank just this February.

If Kroger’s partnership with Nuro passes the test in one of the largest markets in the U.S., it could advance the ball even more quickly than anyone expected on the autonomous grocery delivery model at a critical time in the service’s growth.

If autonomous delivery is adopted as the (fairly) early standard, there would be widespread implications as far as the potential jobs in grocery delivery. The jobs would certainly become fewer and more specialized, eliminating many of the blue-collar opportunities for delivery drivers in the growing service in favor of a one-time investment in an autonomous vehicle. With fewer salaries on the books however, profit margins would also be growing at an even more exponential rate. There are definite pros and cons here, depending on your point-of-view.

Interestingly, Kroger’s partnership with British the online grocer, Ocado, takes automation even further. In November of 2018, Kroger announced it would be teaming with Ocado to build its first fully-automated warehouse in Monroe, OH. This will be the first of 20 automated fulfillment centers Kroger plans to build over the next three years using the Ocado model.

Back in the U.K., Ocado’s largest fulfillment centers employ thousands of robots, packing some 65,000 orders per week for fast and efficient delivery. One day in the near future, Kroger’s online delivery system in many markets could end up being fully serviced by autonomous robots from end-to-end. It might sound a little like science fiction, but the pieces are moving into place for it to become a reality sooner than we might think.

Until then, Kroger’s newly-launched autonomous vehicle experiment in Houston will serve as a critical proving ground for the automated future of grocery delivery.