Coles inks $150m deal with UK firm Ocado to boost online margins
- 26 March, 2019 16:19
Coles is investing up to $150 million on an online ordering and delivery platform after striking a services agreement with UK firm Ocado.
Under the agreement, Coles will get access to the Ocado Smart Platform (OSP) technology – an online grocery website, automated single pick fulfilment technology and home delivery solution.
According to Coles, some of the key benefits of the partnership include a seamless digital customer experience, greater range, improved product availability, more regular delivery windows, and increased network capacity at a lower cost to serve.
The initiative is expected to double Coles’ current Australia-wide home delivery capacity and is expected to lead to an improved profit margin for Coles Online, the company added.
“Ocado is singularly focused on online grocery shopping, and as a result, has become the leading solution provider in the world,” said Coles CEO Steve Cain in a statement.
“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."
Meanwhile, Ocado Solutions CEO, Luke Jensen, said the company is delighted to partner with Coles and help the retail giant go the next level in the online ordering and customer experience journey.
“Our flexible, scalable and modular solution will help them bring new levels of convenience, choice and value to Australian consumers. The Australian market is changing as consumer needs evolve and our platform will enable Coles to lead this transformation in a profitable and sustainable way,” Jensen said.
The agreement will also see the construction of two automated Customer Fulfillment Centres (CFCs), one located in Melbourne and one in Sydney.
Migration to Ocado’s online platform and the development and construction of the CFCs is expected to be completed by the end of the 2023 financial year.
Each CFC has an estimated sales capacity of between approximately $500 million and $750 million per annum, Coles said.
Capital expenditure inclusive of upfront Ocado fees is expected to be approximately $130 million to $150 million over the four-year development and construction period.
Additionally, Ocado will be responsible for the installation of the material handling equipment in the CFCs - including the provision of ongoing maintenance of the equipment - and for the last-mile routing management technology to optimise delivery efficiency and customer service.
Ocado Group, which has more than 15 years’ experience in disrupting the traditional grocery market, has more than 580,000 active customers.