Ocado, the logistics technology provider, has announced another big contract. The Canadian grocery retailer Sobeys has agreed to develop an online grocery business in Canada using Ocado’s ‘Smart Platform’.
Sobeys is Canada’s second largest food retailer with more than 1,500 stores across the country, generating sales of C$23.8bn in 2017.
The ‘Ocado Smart Platform’ will manage all of Sobeys’ e-commerce related logistics operations including last-mile transport systems as well as the creation of a new fulfilment centre.
At present the plan is to build only one fulfilment centre which will be located in Toronto and that will take two years to finish. Just the one warehouse is a little surprising in a country as large as Canada, however the statement from the two companies said that “in addition to this initial CFC [customer fulfilment centre], Sobeys and Ocado will consider developing other CFCs in Canada’s dense urban areas.”
The statement from the two companies also mentioned that “Ocado will invest to install its grid and robots” in the fulfilment centres, which is a little surprising and is an insight into the financial terms of the deal.
The agreement also appears to be based on volume. The small print of the press release mentioned that “Ocado will partner exclusively in Canada with Sobeys to launch their end-to-end solution for online grocery services . . . subject to Sobeys meeting pre-agreed capacity commitments”.
The structure of the contracts between Ocado and its retail clients has been salient in the past, with some very aggressive terms between itself and the UK supermarket retailer Morrisons.
This has to been seen as a huge leap forward for Ocado. Although Canada might be seen as a friendly market for a UK-based firm, the technology company only has one other contract outside the UK. The deal with Sobeys demonstrates that Ocado Smart Platform offers medium-sized retailers the opportunity to access ‘state-of-the-art’ e-retail technology which they otherwise could not afford to develop in-house. In the face of competition from the likes of Amazon this is of strategic importance for such clients. Entering Canada also raises the possibility of expansion into the US, which would transform Ocado into a significant power in global e-retail.
Source: Transport Intelligence, January 23, 2018
Author: Thomas Cullen
