Kroger is using Google and Microsoft clouds to avoid paying Amazon

As Kroger turns to cloud computing, the country's largest supermarket chain is sending millions of dollars to Microsoft and Google.

But not to Amazon.

"For obvious reasons in a competitive way, it makes no sense for us to make a ton to help develop this business for them," said Chris Hjelm, Kroger's information director at CNBC in an interview .

With Amazon's retail activities growing in more industries and competing more directly with a growing number of businesses, Amazon Web Services is starting to experience a negative reaction. Kroger joins companies like Wal-Mart and Target to find other vendors who are processing their huge workloads for their digital and e-commerce offerings. Alphabet said in its latest earnings release that Kohl has migrated to Google's cloud.

In a blog post on Monday, GGV Capital venture capitalist Glenn Solomon emphasized how ubiquitous it has become. Solomon said retail customers have asked several companies in their company's portfolio to use AWS to "provide a duplicate service in another cloud because they would prefer that their data not be stored in Amazon given the fears of competition ".

For Kroger, this fear became more obvious by day. In August, Amazon bought Whole Foods for $ 13.7 billion and instantly cut prices overseas. CNBC also reported on Amazon's possible efforts to break the pharmacy market, another reason to worry Kroger.


Kroger gets about 9% of sales from its more than 2,200 pharmacies.

Hjelm said the company began investing heavily with Microsoft Azure and Google Cloud last year. With Azure, the merchant is launching a digital tablet technology combining the use of sensors and smartphones to alert customers about relevant offers. For e-commerce, delivery and data-centric initiatives, such as smart pricing, Kroger turns to Google. The company also uses Pivotal infrastructure technology.

Kroger has projects running on AWS for the companies he has acquired. But for any new initiative, "this growing investment is not going to AWS," said Hjelm. Regarding Microsoft and Google, "we think we do not lose anything from the point of view of competition with these companies," he said.

While AWS is concerned that Kroger represents an emerging trend, it does not appear in the unit's financial performance or market share.

In the third quarter, revenue grew by 42% to $ 4.58 billion, and AWS generated operating profit of $ 1.17 billion for a company that is used to operating with little or no benefits. Nordstrom, Under Armor, Lululemon and Nisa Retail in the UK are some of the retailers and mainstream brands that have AWS.



For the entire cloud infrastructure, AWS controls 34% of the market, followed by Azure with 12%, IBM with 8% and Google with 5%.

According to AWS, retailers will continue to use their infrastructure because they care more about agility, security and performance when deciding where to run their workload.

"AWS is the undisputed leader in these areas," said a company spokesperson in an email. "End users of retailers do not care about the rivalry that may exist with another retailer."

Like most large established businesses, Kroger does not move everything to the public cloud. The company still has many computing and basic storage functions in its own data centers.

But Hjelm said that in the cloud, Kroger has thousands of ongoing test and development projects, as well as live applications. He did not say how much the company spends on the cloud, but said it has millions of dollars and is roughly evenly split between Microsoft and Google.

"Over time, this balance could change depending on who creates more value," he said.

Tariq Shaukat, a president of Google's cloud division, said in an interview that even though retailers have been reluctant to give their money to Amazon, many of them have always been exploited on AWS. Google is now collecting customers because its cloud platform finally has the services it needs, he said.

"There is growing recognition that GCP is a viable option and a leader in areas that matter to them, such as security, data analysis and machine learning," he said.