Ocado announces new contract with Aeon in Japan


The logistics technology company Ocado has achieved another big sale for its ‘smart platform’ internet retail system. The very large Japanese retailer Aeon Co. Ltd and Ocado Group plc announced on Friday (November 29) that they are to establish an “exclusive partnership agreement” in Japan focussing on online grocery retailing.

In a statement, Aeon said that it would “launch a new company by March 2020…. using AI and robotics, to provide a more convenient online shopping experience for our consumers”. This will use Ocado’s warehousing and retailing technology to establish its first customer fulfilment centre by 2023.

Aeon continued; “it is expected that these technologies can be utilised for the existing Aeon online supermarket business, store pick up, click & collect. Aeon will leverage the world’s leading know-how to launch and operate ‘the next generation online supermarket’ and aim to achieve sales of ¥600bn by 2030.”

As is usually the case with these Ocado contracts, it is not clear what the exact terms of the agreement are, however judging by previous agreements it is likely that Aeon will pay part of the cost of the construction of the customer fulfilment centre and then continue with royalties for the use of Ocado’s technology.

Aeon is Japan’s largest retailing group, owning a number of grocery supermarkets brands, clothing and convenience stores. It is growing across Asia, especially in South East Asia, and is now one of the region’s largest retail groups. It also is a large owner of retail property in Japan.

At the same time as the announcement of the Aeon contract Ocado has launched the sale of £500m ($650m) worth of convertible bonds. This comes after the agreement with the UK retailer Marks & Spencer to buy half of Ocado’s existing online grocery joint venture, for a price of £750m ($970m). It would appear that the cost of building fulfilment centres is high and is stretching Ocado’s finances.

Last month there were rumours that Ocado’s relationship with US retailing giant and key client Kroger had become strained, however there is little substantial evidence for this and the American retailer continues to roll out automated fulfilment centres. Kroger has been suggesting recently that it is adapting the Ocado model to cover the larger geographies of the US. It may be that the cost of building such a huge network of automated facilities spanning the whole of America – including Canada, where Ocado is building a capability for retailer Sobeys – is daunting the management of the Hertfordshire-based technology company and this is behind its increasing appetite for capital.

Source: Transport Intelligence, December 3, 2019

Author: Thomas Cullen