Kroger and Ocado in Major Automation Deal

An exclusive partnership between Kroger and leading U.K. online grocer Ocado could result in the development of up to 20 automated warehouses over the next three years, according to a report from Retail Leader.

Kroger and Ocado said they are already working to identify the first three sites in 2018 for development of new, automated warehouse facilities in the U.S., and will identify up to a total of 20 over the first three years of the agreement. Kroger said the partnership with Ocado, a recognized pure-play e-commerce leader with annual sales of $2 billion in the U.K.’s highly developed grocery market, will accelerate its creation of a seamless shopping experience for America's families.

"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, Kroger's chairman and CEO. "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."

The alliance will bring to the U.S. for the first time the unparalleled technology underpinnings of the Ocado Smart Platform, which includes online ordering, automated fulfillment and home delivery capabilities, according to the companies.

Kroger said it would increase its investment in Ocado, giving it a 6% ownership interest in the company, ensuring that Ocado partners exclusively with Kroger in the U.S., enhancing the supermarket chain’s digital and robotics capabilities and helping expand its seamless coverage areas.

While click and collect offerings such as Kroger’s Clicklist have been embraced by retailers and shoppers, relying on stores as fulfillment centers – either for home delivery or order pick up – is inherently inefficient from a supply chain standpoint and not seen as a long-term solution. This explains why Kroger has embraced Ocado’s technology platform as it will allow Kroger to be less reliant on leveraging stores as distribution nodes.

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