The value of retail fulfilment was laid bare last week when Ocado’s share price surged 80% after signing a distribution deal with US grocer Kroger.
That monster valuation is not down to Ocado’s retail prowess, but its technology and fulfilment capabilities.
For the past few years, Ocado has been rebranding itself as a tech platform and vying to sell its expertise in this area to other retailers.
And there is no doubting this expertise. Its automated warehouses are powered by an army of robots that pick and pack in super-fast time.
In fact, its Andover distribution centre processes 65,000 orders per week and can pick a typical 50-item order in a matter of minutes.
It’s patented technology is good and it’s getting better.
Last year, Ocado worked with European scientists to develop robot hands that can pick apples without damaging them and a new computer vision system that allows robots to grasp an item without the need for a 3D model of it.
The threat of Amazon
Kroger is not alone in turning to Ocado. French grocer Casino, Canada’s Sobey, Sweden’s ICA and Morrisons, of course, have already partnered with the firm.
But Kroger, the US’ second-largest grocer, is the biggest deal yet and will see it open 20 Ocado-designed warehouses over the next three years.
It is no surprise that this flurry of retailers are signing up to Ocado now as Amazon makes its big push into online grocery.
Amazon’s $13.7bn acquisition of Whole Foods last summer sent shockwaves across the grocery world.
Whole Foods gives Amazon the respected brand and range in fresh food, which, combined with the latter’s fulfilment prowess, could be the winning recipe for online grocery success.
Very few compare to Amazon when it comes to fulfilment. Apart from Ocado, that is.
And if using Ocado’s platform to deliver fast, efficient orders can protect supermarkets from the growing threat of Amazon, then Kroger won’t be the last retailer to pay for its services.