{"id":21124,"date":"2017-11-11T11:31:16","date_gmt":"2017-11-11T16:31:16","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/ocado-and-the-future-of-grocery-retail\/"},"modified":"2017-11-11T21:42:22","modified_gmt":"2017-11-12T02:42:22","slug":"can-ocado-weather-the-disruption-of-the-grocery-industry","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/can-ocado-weather-the-disruption-of-the-grocery-industry\/","title":{"rendered":"Can Ocado Weather the Disruption of the Grocery Industry?"},"content":{"rendered":"

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Anticipating the Future of Grocery<\/u><\/strong><\/p>\n

Amazon\u2019s acquisition of Whole Foods reiterated the threat that e-commerce poses to brick-and-mortar grocery retailers, but one company has been trying to anticipate this threat for almost twenty years.<\/p>\n

Founded in 2000, UK-based Ocado is “the world\u2019s largest dedicated online grocery retailer,” and their mission is to deliver “the best shopping experience in terms of service, range, and price.\u201d[1]<\/a> Ocado\u2019s ability to do so hinges on the digitalization of their supply chain, which leverages automation, proprietary technology, and the aggregation of scale using large warehouses called Customer Fulfillment Centres (CFCs)s.[2]<\/a> Every activity carried out in these CFCs runs on data:<\/p>\n

Receiving and stocking inventory:<\/strong> When inventory arrives, Ocado\u2019s computers use data to predict what stock will be needed and when, so that they can direct a human-operated crane to organize these pallets in the most efficient manner possible.[3]<\/a><\/p>\n

Picking:<\/strong> When picking items for customer orders, the picker does not have to worry about deciding the best way to place items in each bag \u2013 the computers have learned how to avoid suboptimal outcomes like putting bleach next to meat and guide the picker accordingly.[4]<\/a><\/p>\n

Delivery:<\/strong> To create the most efficient delivery schedule, Ocado relies on data from past deliveries. Ocada tracks each van\u2019s GPS, fuel usage, acceleration, braking, and even \u201cdwell time\u201d in front of a customer\u2019s house.[5]<\/a><\/p>\n

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The inside of Ocado’s Hatfield Customer Fulfillment Centre.<\/figcaption><\/figure>\n

Rising Concerns<\/u><\/strong><\/p>\n

Given their first mover advantage, why should Ocado be concerned about this megatrend? The answer, in short, is competition. Already dominated by established competitors like Tesco, Sainsbury\u2019s, Marks & Spencer, and ASDA, the UK grocery industry is becoming increasingly crowded with the introduction of discount retailers like Aldi and Lidl, and e-commerce giants like Amazon. In an industry with notoriously low margins, success depends on one\u2019s ability to maximize efficiency. Thus Ocado is facing a situation wherein a number of hungry and aggressive competitors are looking to invest in their supply chains and eliminate Ocado\u2019s competitive edge.<\/p>\n

Staying Competitive<\/u><\/strong><\/p>\n

One of Ocado\u2019s ongoing strategies is to monetize their IP. Companies who lack the resources to digitalize their supply chains can purchase Ocado\u2019s proprietary end-to-end solution, the Ocado Smart Platform. This strategy is having limited success. As of this time, only two companies \u2013 grocery retailer Morrison\u2019s[6]<\/a> and garden center business Dobbies[7]<\/a> \u2013 have partnered with Ocado.<\/p>\n

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Ocado’s end-to-end proprietary solution for retailers looking to digitalize their supply chains and move their business online.<\/figcaption><\/figure>\n

Ocado\u2019s long-term strategy is to double down on their technology and automate as many of their processes as possible. This strategy reflects their confidence that these investments will reap long-term efficiency and cost-cutting benefits that outweigh the initial costs. Some of the projects in development include the following:<\/p>\n