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Tunnel Vision: Will Kroger Give Away Its Advantage?
Result: Kroger could keep its competitive advantage from the tunnel for several years. That’s the most any retailer (or IT vendor, for that matter) can hope for these days. There will be more tunnels from more vendors. Eventually, every grocery chain will use them—or not. But they won’t represent a competitive advantage, just another product.
Kroger does have one other competitive advantage it’s not likely to lose. Unlike the vast majority of retailers, Kroger has a real R&D lab developing hardware. That in itself is a competitive differentiator. After all, nobody except an IT vendor develops hardware anymore. Software? Sure, though prevailing wisdom is that off-the-shelf is preferred over built-from-scratch.
But hardware? When was the last time you heard of a retailer creating a hardware IT product to use in stores that’s bigger than, say, a barcode scanner? That doesn’t happen. (Even those custom handhelds are typically smartphones or PDAs with added software. Apple, one of the few retailers in a position to create retail IT hardware, doesn’t bother; it just repurposes iPhones.)
Only a handful of other U.S. retailers are rich enough and IT-sophisticated enough to try something like that (think Target, CVS and Walgreens for IT sophistication and Wal-Mart for money). They might decide to get into the IT R&D business, though it doesn’t seem likely.
But after four years in the R&D trenches, Kroger may have developed an advantage it literally can’t give away.
-Marc
January 20th, 2011 at 5:13 pm
Very interesting, and I agree that Kroger does hold the advantage.
At Symbol Technologies, a retail heavyweight in its heyday, a similar decision was made to OEM embedded scanner technology to competing vendors. The result? Symbol enjoyed lower costs thanks to higher volume production, competitive information of how many scanners and rugged mobile computers with that embedded scanner were used by each competitor, and a sustained competitive advantage in using the latest greatest first, then passing it down the OEM chain later.
Perhaps Kroger could achieve similar advantages, along with the knowledge of how to use and enhance the solution better than their competitors?
January 21st, 2011 at 2:36 pm
The future has many things in store for retailers but paramount is an anticipated shortage of workers to run our stores in the next decade. Anything that helps those workers get more accomplished with more accuracy is a boon. Also, the competitive differentiation a retailer will have in IT comes not from any single point solution but the composite Enterprise applications that are enabled via web-services to use that information across the organization. That infrastructure is not easily replicated at competitors so I think Kroger is very smart as this article says. Well done, Kroger!