Kroger will expand its online ordering, automated fulfillment and home delivery capabilities through a partnership with Ocado, a UK-based online grocery retailer. Ocado will partner exclusively with Kroger in the U.S., providing the grocery retailer with access to its Ocado Smart Platform.
The companies are working to identify locations for three automated warehouses in the U.S. this year and up to a total of 20 locations in three years.
Kroger will take an additional 5% stake in Ocado, bringing its total investment to more than 6%. The partnership is part of the Restock Kroger initiative.
“We see Ocado as an innovative, exciting and transformative partnership in pursuit of our Restock Kroger vision, to serve America through food inspiration and uplift,” said Rodney McMullen, Chairman and CEO of Kroger, in a statement. “We are actively creating a seamless digital experience for our customers. Our partnership with Ocado will speed up our efforts to redefine the food and grocery customer experience — creating value for customers and shareholders alike.”
Ocado uses purpose-built robots, which are capable of picking a 50-item order in minutes, to man its automated warehouses, Paul Clark, Ocado Chief Technology Officer, wrote in the Harvard Business Review. The retailer harnesses AI and machine learning to predict demand for 50,000 different products offered through its retail program, among other tasks.
“Ocado has really awesome technology that works,” said Ken Lonyai, Independent Consultant and Strategist, in a RetailWire discussion. “Kroger has been impressive in its efforts to explore innovation and stand up to threats from Amazon and Walmart in grocery. Automated inventory/pick and pack at this level is a competitive boost and the exclusivity raises them an extra couple of notches.”
The Kroger deal is “seismic” for Ocado, which has been looking to break into the U.S. for some time, according to Bryan Roberts, Global Insights Director at tcc global. However, the market poses different challenges than the UK.
“The scale of the deal could shake up the current U.S. grocery e-Commerce market, offering a step-change in service levels, order accuracy and timeliness,” said Roberts in an email sent to Retail TouchPoints. “But much of the U.S. lacks the benign market drivers that make UK grocery e-Commerce thrive, like dense populations and low car ownership among city-dwellers. It is likely that the partnership will adopt a city-focused strategy in the fulfilment center roll-out.”