Dive Brief:
- Kroger and Ocado will build their fourth automated customer fulfillment center (CFC) in Forest Park, Georgia, just south of Atlanta, the companies announced in a news release.
- The 375,000-square-foot facility, which utilizes advanced AI and robotics to fulfill online orders, will cost $55 million to build. Kroger plans to open the facility in 2021.
- Kroger and Ocado have also announced CFC locations in Monroe, Ohio; Groveland, Florida; and a yet-to-be-disclosed location in the Mid-Atlantic. The companies began construction on the Monroe facility last month and plan to build 20 CFCs in all.
Dive Insight:
The Forest Park site is currently home to a 1 million-square-foot Kroger distribution center the company built just a few years ago. This means the new Ocado location will have a built-in transportation and supply network that can help it quickly assemble orders and get them out to shoppers’ homes as well as stores.
Kroger is the grocery leader in Georgia, with about 31% market share, according to data from The Shelby Report. Metro Atlanta has become a hive of grocery activity, with insurgents like Sprouts Farmers Market mixing it up with legacy players like Publix and Walmart. E-commerce has become the latest battlefront.
Ocado’s automated “sheds” utilize advanced AI and robotics to efficiently fill grocery orders, improving the economics of a capital-intensive online business. But the system requires high order volume to pay off. Metro Atlanta has a lot of Kroger stores and customers, and demand for e-commerce is growing. However, penetration remains stubbornly low — around 3% of grocery sales currently come through e-commerce — while competition is intense. Walmart has had tremendous success with its free order pickup service, which will be available at more than 3,000 stores nationwide by the end of this year.
Kroger hopes Ocado can help it leap ahead of competitors. In addition to same-day delivery, Kroger is also testing Rush, a service that gets meals and other “need it now” products to customers in as little as 30 minutes. Rush could eventually gel with Ocado Zoom, a fast-delivery currently testing around London that also offers a limited assortment of goods.
Located several miles south of the city proper, Kroger’s Forest Park campus offers quick access to much of metro Atlanta. In addition to delivery, Kroger also plans to use Ocado’s sheds to assist stores in supplying pickup orders — an effort aimed at preventing strain on store inventory.
In its most recent earnings report, Kroger’s digital sales grew 42% as pickup and delivery service reached 93% of households in the company’s operating footprint. Ocado, meanwhile, reported a £100m (more than $125 million) loss due to a fire that broke out at is CFC in Andover. Company president Tim Steiner said Ocado has taken steps to ensure such a mishap won’t occur again.
