Coles teams up with Ocado to enhance online grocery

Coles has entered an exclusive services agreement with British online supermarket group Ocado.

Under the agreement, Coles says it will launch an end-to-end online grocery shopping solution. This will include:

  • A significantly enhanced customer experience, supported by Ocado’s entire end-to-end proprietary software applications and technology solutions required to operate a world-class online grocery business, known as the Ocado Smart Platform (OSP). This will be available to Coles’ customers Australia-wide by the 2023 financial year.
  • Two state-of-the-art automated customer fulfilment centres (CFCs). One will be located in Sydney, while the other will be in Melbourne. Ocado will be responsible for the installation of the material handling equipment in the CFCs, including the provision of ongoing maintenance of the equipment.
  • Last-mile routing management technology to optimise delivery efficiency and customer service.

A best-in-class customer experience

According to Coles, the partnership provides a “unique opportunity” to deliver a best-in-class customer experience driven by greater range, improved product availability and freshness, a significantly enhanced online capability and more regular delivery windows.

Furthermore, it is believed that Coles will be better able to meet the increasing demands of its customers as it increases network capacity at a lower cost to serve. The introduction of the CFCs will also provide a safer working environment for Coles’ team members.

“Ocado is singularly focused on online grocery shopping, and as a result, has become the leading solution provider in the world,” Coles CEO Steven Cain said.

“We are delighted to be partnering with them to make life easier for Coles’ customers here in Australia. Ocado’s ongoing investment and retail partnerships around the world will help us continue to improve our offer into the future.”

The fine details of the agreement

Under the services agreement, Coles will pay Ocado fees for the installation and maintenance of the equipment within the CFCs and licensing of the OSP software. It is estimated that each CFC has a sales capacity of between approximately $500 million and $750 million per annum.

It is claimed that this will approximately double Coles’ current home delivery capacity Australia-wide and is expected to lead to an improved profit margin.

Coles’ capital expenditure inclusive of Ocado upfront fees, is projected to be approximately $130 million to $150 million over the development and construction period, relating to the IT integration of the OSP, non-automated equipment and construction of the CFCs.

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