Kroger to Bring Ocado Technologies In-Store

The Kroger Co. and Ocado, which have faced scrutiny of their sophisticated internet grocery ambitions on the premise that the massive warehouses enabling its solution take years to build while the grocer puts stores under stress to meet booming near-term e-commerce demand, are addressing the latter concern together.

In a joint announcement, the Cincinnati-based grocer and the U.K.-based robotic warehouse and software provider said they would deploy Ocado’s in-store fulfillment (ISF) software in combination with Kroger’s technologies nationwide beginning next year. The software will optimize associates’ efforts to assemble orders and make it easier and more efficient for them to find products when fulfilling customer pickup orders.

The announcement came as the partners said they would build a 10th grocery warehouse together—getting Kroger halfway to its intentions to support nationwide grocery e-commerce behind 20 Ocado fulfillment centers. The exclusive U.S. partnership between Kroger and Ocado Solutions was announced in May 2018 but no facilities are yet operational. The first two customer fulfillment centers (CFCs) are expected to open early next year in Monroeville, Ohio, and Groveland, Fla. Others are under construction in Frederick, Md.; Atlanta; Dallas; Pleasant Prairie, Wisc.; and Romulus, Mich.; or planned in unnamed cities in the Pacific Northwest and West regions.

The newly announced CFC will be located in the South region, but a specific location has not been disclosed. It will measure 200,000 square feet.

Kroger officials have long maintained the Ocado solution, which uses robotic picking and other advanced technologies enabling it to be a retailer in the U.K. and a solutions provider for other brands worldwide, would provide it with a superior economic model to profitably tackle the costly premise of grocery e-commerce—an offering it currently supports primarily through a store-based pick model. And they’ve long taken pains to express the Ocado solution would provide for things such as on-demand delivery and other efficiencies typically not associated with a warehouse-based solution, while also expanding its reach to parts of the country—like Florida—where it does not operates stores, but details have been light.

In the meantime, it is awaiting construction of central facilities that generally take about two years to build.

Through their expanding partnership, Kroger said it would leverage Ocado’s ISF capabilities “with the best of Kroger’s technology and digital solutions” to support the rapid growth of pickup demand across Kroger stores nationwide. Ocado’s solution includes proprietary software that supports associates’ efforts to assemble orders and makes it easier and more efficient for them to find products when fulfilling customer pickup orders, they said.

The surge of demand for e-commerce associated with the coronavirus—which sources say advanced adoption to levels not expected for several years—put pressure on all retailers to accelerate their fulfillment capabilities. Kroger, like many peers, was moved this spring to hire thousands of additional workers amid reports that at least some stores were overwhelmed with demand.

“Kroger continues to accelerate the development and rollout of customer-centric technology and digital capabilities to build a seamless ecosystem that combines the best of the physical store experience with the digital experience,” said Yael Cosset, Kroger’s chief technology and digital officer. “Ocado’s in-store fulfillment capabilities, leveraging AI, will further contribute to continuous improvement of the customer pickup experience.”

“In the long term, we know that winning online in grocery means having the best customer service, underpinned by the best operational economics,” added Luke Jensen, CEO of Ocado Solutions. “In leveraging the wide range of Ocado fulfillment technologies, Kroger is accessing the best customer offering for online grocery in the world, proven in the U.K., one of most developed and competitive markets for grocery online.”