Ocado has unveiled a range of technologies, from lighter robots to automated grocery picking, to help it win new corporate customers and compete with rapid delivery start-ups.
The FTSE 100 company said on Wednesday that innovations, including lighter “bots”, automated loading of grocery orders and software improvements, meant the large fulfilment centres that it builds for itself and other supermarket groups would be cheaper to construct and operate.
It also said that smaller centres would be able to carry a bigger range of products. “We have broken through the trade-offs between big ranges, low prices and the ability to delivery whenever customers want,” said chief executive Tim Steiner.
Ocado began marketing warehouse technology developed for its own use to third parties in 2014. In the two years to the end of 2019, it enjoyed a purple patch during which it signed up five new clients, including US grocery giant Kroger. Its shares quadrupled in the period.
But since then it has signed up just one relatively small new user, even though Covid-19 triggered a huge rise in online grocery shopping. Its shares have almost halved in the past 12 months.
The pandemic created an urgent need for delivery capacity and highlighted the time it takes to construct, fit out and commission automated fulfilment centres, which cost around $50m apiece.
Ocado ended 2020 with its own warehouse capacity at just 3 per cent ahead of the start of that year. It has added more over the past year, but rival supermarkets picking manually from stores were able to double the number of orders they dispatched each week.
More recently, grocery delivery start-ups such as Getir, Gorillas and Gopuff have appeared, offering very quick delivery of a limited range of products from small local warehouses. Food delivery apps such as Deliveroo and Uber Eats also diversified into delivering groceries when restaurants were closed during lockdowns.
Steiner has previously dismissed the threat from such operators, saying their high spending to win customers was unsustainable. But on Wednesday he acknowledged that the pandemic “created the conditions for thinking about shorter lead times and immediacy”.
In recent months, Ocado has been promoting the variety of automated facilities it can offer, ranging from a few thousand square feet in the back of a large supermarket to a standalone warehouse.
The service it offers clients to help them pick groceries in-store has become “a core product, rather than something we used to offer customers so they didn’t need to go somewhere else for it”.
The new technologies will be available to install in new buildings completed from 2024 onwards and can be retrofitted in existing ones. The new lighter robot design “will have a knock-on impact on buildings and systems”, said Steiner, reducing the thickness of the concrete floor and the requirements for cooling.
The effect will be a “material” reduction in the time and cost of construction and fit out. Ocado also forecasts a 30-40 per cent reduction in labour costs from greater automation.
One analyst said the developments felt like a mix of things the company would have done in due course and requests from existing clients, particularly Kroger.
But he added that the new robot design and robotic picking “felt like quite big step changes in the technology”.
Ocado shares closed up more than 5 per cent at £15.01 on Wednesday.
