Where next for the Ocado Smart Platform?

Date : 22 February 2021

Rachel Sibson

Retail Analyst

During a year like no other, Ocado Group delivered a 33% year-on-year (YoY) increase in sales. 2020 saw the launch of the first international CFCs for Groupe Casino in France and Sobey’s in Canada. In 2021, seven partners will be live with Ocado’s technology with ten CFCs live worldwide. Ocado will continue to invest in the Ocado Smart Platform to attract new partners and find efficiencies.

In our new and updated Ocado Strategic Outlook report we review the impact of COVID-19 and answer the big questions for the Ocado Group and Retail division. Retail Analysis subscribers can read the full report here.

Can the Smart Platform stay ahead of the competition?

Ocado needs to improve its product to retain and attract new partners. New deals will enable Ocado to increase investment and improve the proposition, creating a virtuous cycle.

Here is a taster of three key points from the report to highlight ways in which Ocado will stay ahead of the competition…

1. Driving efficiency

Ocado aims to drive efficiencies throughout every process of its operations, and this has been key to its growth during the pandemic.

One area of focus is making its picking robots more efficient. By improving picking efficiency, Ocado’s cost to serve it significantly cheaper than bricks and clicks retailers. It can therefore invest in marketing to a greater degree, and with order accuracy so high, shoppers will unlikely to go elsewhere. In November 2020, it bought Kindred Systems, (an AI robotics company) and Haddington Dynamics (designs and manufacturers robotics arms).

In 2017, Ocado launched the UK's first autonomous grocery delivery trial in Greenwich to explore the possibility of deploying self-driving vehicles as part of the offering for the Smart Platform. This would provide partnering retailers with an end-to-end integrated service and a last mile solution for fast and efficient home deliveries. Whilst there has not been an update to the trial, in January 2020, Ocado Group’s chief executive Tim Steiner told NRF that Ocado is working on developing “things like driverless technology” and “what jumps out of that vehicle with the groceries and gives them to the customer”.

Other developments to watch out for this year include Ocado’s investment in vertical farming. It plans to co-locate vertical farms within or next to its CFCs, allowing produce to be harvested hours before packing.

2. New missions

Ocado’s mini-CFC in Bristol will enable it to test more same-day deliveries. Retail Week also reports that Ocado plans to open 12 micro-CFCs across London for its Zoom delivery service. By offering quicker deliveries, Ocado can cater for new missions including top-up and meal-for-tonight. Smaller orders will mean Ocado will have to make the supply chain more efficient.

Source: Ocado

Another interesting development is Ocado’s investment in robotics start-up Myrmex. The two companies will work together to build a bespoke, automated, click and collect solution for micro dark stores. Will we see Ocado launch standalone city centre click and collect points, like retailers in France? This will effectively enable Ocado to become a convenience retailer. Click and collect points could also be integrated into M&S stores.

Source: Myrmex

It also invested in Karuki, a start-up focused on developing robotic solutions for food preparation, which can automate the assembly of ready-to-eat meals and food-to-go products. Looking forward, will we see Ocado able to provide solutions for groceries, meal kits, and meal-for-tonight all in one order?

3. Move into non-food

Kindred Systems, which Ocado acquired last year, is already working with businesses outside of grocery such as Gap and American Eagle. In its annual report, Ocado stated that further opportunities exist to apply its technology in new categories such as general merchandise and logistics.

Source: Kindred Systems

Subscribers can read the full Ocado Strategic Outlook report here, which answers the following key questions along with implications for your business:

  • How will Ocado Retail maintain its growth?
  • What’s the impact of the planned new capacity in the UK?
  • Why is the Ocado Smart Platform launching in these markets?
  • How efficient is the Smart Platform?
  • Can the Smart Platform stay ahead of the competition?