Kroger is taking on Publix in Florida without opening a single

GROVELAND, Fla.— Kroger wants to attract tens of thousands of new customers in Florida — and it plans to do that without opening a single grocery store.

Instead, the supermarket operator is relying on a giant warehouse of robots that help retrieve such products as bananas, milk and meat, and a fleet of delivery drivers that drop off online grocery orders at people’s doors. The automated warehouse — big enough to fit nearly eight football fields — is a pricey bet for the grocer and an illustration of its e-commerce ambitions.

Three years ago, Kroger struck a deal with British online grocer Ocado to build a network of customer fulfillment centers, which it calls sheds, across the U.S. It chose Ocado because of its track record in the United Kingdom, where it’s gained popularity with customers. Kroger has opened two sheds so far, with plans for at least nine more over the next two years.

Florida is ground zero as Kroger rolls out a national strategy to become a more dominant e-commerce player. It has invested at least $55 million just on construction of its shed alone. It has hired 900 employees and counting across the state. And it has announced plans to use the state as a blueprint to break into new markets and take on grocery rivals, including entrenched regional players like Florida-based Publix and retail behemoths like Amazon and Walmart with market values that are about 54 times and 13 times larger than Kroger.

Kroger has argued that the sheds will help it keep up with customers who are buying more food and household items online — while increasing the money it makes from each of those orders. With its Florida expansion, the grocer must not only prove the sheds can power a large, profitable e-commerce business in a notoriously low-margin industry, it must also win over customers in a brand-new market where some may not even know its name. It may be the largest supermarket operator in the country, but in the state, Kroger is the newcomer and, at least initially, the underdog.

The playbook that the grocer is developing with Kroger Delivery in Florida will be useful as it expands the business to the Northeast. Last month, it announced plans to build a shed to serve customers in New York, New Jersey and Connecticut for the first time. It has not shared its timetable for that project.