Kroger beefing up digital

Check out the following link about Kroger Co. making the push to e-commerce, following trends from Amazon/Whole Foods and Walmart.

http://adage.com/article/cmo-strategy/kroger-s-e-commerce-deal-warning-shot-food-battle/313568/

What’s interesting to me is their decision to partner over acquire – by partnering with Ocado, a proven expert in online grocery, Kroger doesn’t need to reinvent their business, build their capability from the ground up, or outlay significant capital through acquisition (albeit Kroger does own a minor stake and have increased their ownership by 5% in this latest move). The move to partner with Ocado sent the stock soaring nearly 6% today after a dismal -10% start to the year.

Kroger has also been partnering with 3^rd party online food delivery services, such as Instacart, to take advantage of the trend for people wanting food delivered straight to their doorstep.

Only to find they currently don't cover my area, which could change with the Ocado deal. Ocado will apply their technology to the U.S., and will possibly establish up to 20 US distribution centers over the next three years. Due to their late entry I'm sure my digital food habits will be even more entrenched by the time they offer online service (for better or worse), for which I'm sure they will pay the price for being this late to the game.

By partnering they potentially can move quickly on initiatives, though I’d imagine this might hurt them later when they want to act nimbly in response to new market developments since they will be dependent on their external business partners. They will also likely have to concede more of the value from the enhanced service capability due to not having the entire process in-house. Contrast this with Amazon acquiring Whole Foods or Walmart’s tactic of making significant investments in their e-commerce capabilities. Amazon and Walmart stand to benefit from owning the entire value chain in exchange for their greater initial investment. In this sense, they have taken a bolder step towards a digital future than Kroger. Given that Kroger is partnering only now, the move seems reactionary to Amazon and Walmart’s earlier bets.

Being new to the study of the digital landscape, the comparison makes me wonder the circumstances in which partnering or having full control might be preferred in one’s digital platform offering?