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Ocado Rolling Out On-Demand Offering

'Zoom' will provide smaller assortment but faster delivery
Photograph courtesy of Ocado

Ocado, which says its massive robotic warehouses have made online grocery efficient and profitable, is now going for efficient, profitable and fast.

The British retailer said it would begin testing Ocado Zoom, a version of its service intended to provide deliveries in less than an hour. Ocado’s current offering, both in the United Kingdom and with partners such as Kroger in the United States, typically provides next-day delivery.

The service involves utilizing a micro-fulfillment center to be served by its larger robotic counterparts, CEO Tim Steiner said during an earnings presentation this week. Zoom would offer a smaller assortment than its full range—about 10,000 items—and is intended for smaller basket sizes. Those orders would include a higher service charge, Steiner said.

After a testing period this year, Steiner said Ocado intended to make the offering available to partners licensing its technology, such as Kroger, which is building the first of as many as 20 fulfillment centers utilizing Ocado’s technology.

The offering will provide an on-demand option for customers increasingly doing their grocery shopping online, Steiner said, while maintaining what he describes as superior financial metrics at prices competitive with couriers currently offering such a service shopped from retail stores. It will begin testing in West London next month.

Ocado currently runs its own online business in the U.K., and serves as the logistics and delivery partner for the Morrisons chain there. It is in the process of expanding internationally in partnership with ICA in Sweden, Sobeys in Canada, Groupe Casino in France, and Kroger in the United States. The first Ocado facility in the U.S. is under construction outside of Cincinnati and expected to open next year. Kroger officials said they would announce two additional sites later this year, including one outside of a market where it currently operates retail stores.

“We spent 18 years becoming a world leader in our field, a field most people didn’t think existed,” Steiner told analysts in his presentation. “But today all over the world, all grocery retailers are focused on the channel shift that’s occurring in their markets, and the need to apply robotics and automation to generate greater efficiency in a market that has always been won by the person who can cost-dominate the most.

“Outstanding execution is our priority for our retail customers everyday and for our retailer customers as we build out and help them to launch their own retail platforms,” he added. “We have many opportunities in grocery and beyond to create future value, and we still believe very firmly at Ocado that our story has only just begun.”

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