Ocado boasts of its ecommerce and fulfilment platform capability – how does the technology work and who could benefit from using it?

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Ocado allows retail partners to create a scalable grocery business in the UK or abroad

The online retailer’s renegotiated deal with Morrisons has raised questions about which businesses the etailer could collaborate with next and what sets its technology apart from its rivals.

What is Ocado’s Smart Platform?

The grocery etailer built its smart platform technology to provide food retailers without an existing online offer with the means of entering the online market with ease.

The platform positions Ocado as a technology supplier working in partnership with retailers rather than a just standalone grocery etailer.

The technology, which was built by Ocado’s IT team, is designed to allow retail partners to create a scalable grocery business in the UK or abroad and covers web platforms and mobile apps to browse and order technology, in addition to supply chain management and last mile delivery.

How it works

The grocery etailer’s smart platform covers three tranches of online retail – the shop itself, fulfilment and last-mile delivery.

The online store offers retail partners a platform that delivers a standalone ecommerce website alongside a mobile and tablet app. Each of the platforms are equipped with back-end systems to manage the content on the website and algorithms that can offer shoppers personalised recommendations based on their previous purchases.

Ocado filed a patent to have robots picking and packing groceries at its warehouses last May

Ocado install and manage the fulfilment equipment from the retail partner’s existing warehouse estate. The equipment, which is run and maintained by Ocado staff, is designed to be quickly integrated into a retailer’s existing fulfilment offer and scaled based on the size of its operation, saving time and money in comparison with developing a supply chain management system from scratch.

Alternatively, retail partners can utilise space in Ocado’s growing network of automated warehouses, which boast cutting-edge retail technology. The grocery etailer filed a patent to have robots picking and packing groceries at its warehouses last May, which have since been rolled out across its fulfilment centres including its Andover warehouse, which boasts 25km of conveyor belt.

In February, the retailer also installed wireless mobile technology in its automated warehouses to further drive efficiency. The technology allows fleets of up to 1,000 robots to communicate 10 times per second to ensure orders are processed as quickly a possible.

With Morrisons looking to increasingly run its ecommerce operations from its existing store network, Ocado will likely be on the lookout for new partners

Ocado foresees this 4G mobile technology as being an integral part of its growth strategy, as it has the capacity to handle 20 times the number of product movements that are currently being carried out at its warehouses.

All the software and systems required to run the supply chain equipment are also provided under the etailer’s smart platform.

Driving efficiencies in last-mile is the cornerstone of Ocado’s smart platform delivery proposition. Once an order is made online retail partners get access to the etailer’s optimal delivery route technology, which Ocado says ensures deliveries are made to shoppers as quickly as possible at the lowest cost to the retailer.

Who could use it?

Existing partners in the UK include Waitrose and Morrisons. As part of its revised agreement with Morrisons, Ocado can now offer its proprietary technology to grocers outside of the remaining big four and Aldi and Lidl. Before today, Morrisons had stipulated that Ocado could not provide services to any UK grocer other than itself.

And with Morrisons looking to increasingly run its ecommerce operations from its existing store network, Ocado will likely be on the lookout for new partners.

When Ocado’s smart platform was first launched there was talk of the etailer using the technology as a means of appealing to international partners – but to date, a deal is yet to materialise.

Some experts have suggested that the likes of The Co-operative and Marks & Spencer could be interested in collaborating with Ocado as they mull over a potential entry into the online grocery market.

However, Planet Retail analyst David Gray is doubtful that a partnership with Ocado would be high on either retailers’ to do list.

“The Co-op is mainly a convenience store provider so I don’t think moving online will be a priority for them,” he says.

“Their business is in quite a good position at the moment and the problem with going online is that it dilutes margins, so I wouldn’t have thought you’d hear anything from the Co-op in terms of moving online for at least a few years.”

“For me [Ocado’s] future is not as a retailer, it’s as a technology provider for other enterprises”

Bryan Roberts, TCC Global

Marks & Spencer may have the margins to make a move into online profitable, but Gray was sceptical that it would be a primary concern for new chief executive Steve Rowe.

“Marks & Spencer’s grocery business is really motoring right now, if you strip out fashion and general merchandise it is one of the best performing food retailers,” he says.

“If you were in charge, why would you change something that is working when you could focus your energy on the parts of the business that are hampering performance?”

While obvious UK retail partners to bolster Ocado’s technology arm may not be forthcoming, TCC Global insight director Bryan Roberts stresses that acting as a supplier for third parties will still be a priority for Ocado.

“For me it’s future is not as a retailer, it’s as a technology provider for other enterprises,” says Roberts, adding that Ocado could look beyond the food retailers for potential partners.

”A partnership outide of grocery might not be earth shattering in terms of scale but it will prove that their platform was diverse enough for a variety of sectors,” says Roberts.

“As a retailer Ocado is branching out into health and beauty and household goods, so there is a possibility that they could be succcessful as a technology supplier in non-grocery environments as well.”

Nevertheless, the technology supplier could face an uphill battle when convincing retailers to invest in technology that that is also being used by their competitors.