Kroger to open first high-tech fulfillment center

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Kroger to open first high-tech fulfillment center

By Deena M. Amato-McCoy - 11/20/2018
Kroger is taking its first steps in leveraging its partnerhip with U.K. online grocer Ocado in an effort to get an edge in the online grocery delivery wars.

Kroger on Monday announced that it will open its first customer fulfillment center, or CFC, in Monroe, Ohio. The warehouse, which will be an automated facility that will leverage digital and robotic capabilities, will be the first project that it is collaborating on with Ocado. The two companies forged an exclusive partnership in May, a deal that will enable Kroger to leverage Ocado’s smart platform that supports online ordering, automated fulfillment and home delivery capabilities.

Kroger is investing $55 million to build the first facility (which it refers to as a “shed”). The building will span 335,000 sq. ft., and is expected to generate more than 410 new jobs, according to the grocer.

“Ocado is a U.K.-based company with global ties and advanced digital and robotic capabilities. Working together, we will develop the strongest possible supply network to support a seamless customer experience that can serve every person in America,” said Alex Tosolini, Kroger’s senior VP of new business development. “It’s all about building a seamless supply chain to provide our customers with an amazing shopping experience.”

This is only the first step in the partners’ plan. Looking ahead, the automated facility will be replicated in other cities across America. Kroger and Ocado plan to open 20 CFCs, according to Kroger.

“We are delighted to be supporting Kroger in its efforts to transform the service and value it brings to U.S. customers,” said Luke Jensen, CEO of Ocado Solutions. “Today’s announcement of the first CFC is an important first step to making that happen. It’s all the more exciting that this CFC will serve Kroger’s hometown of Cincinnati.”

Prior to joining forces in May, Kroger already had approximately a 1% stake in Ocado. Through the new deal, Kroger increased its existing investment by 5% in a subscription rights agreement, bringing its total investment to more than 6%.

Kroger also expects the partnership to give the company an edge as the grocery war continues to heat up. For example, Amazon is expanding its breadth in the grocery segment through its $13.7 billion purchase of Whole Foods Markets in August 2017.

In June, Target expanded its same-day shipping and pickup services, Shipt and DriveUp, across stores in the Midwest and Southeast. This put the discounter more than halfway toward its goal of making these services available coast-to-coast in time for the holidays. Additionally, Target offers next-day delivery service of household essentials through its Target Restock program nationwide. The service is free for all Target REDcard holders, and $2.99 for all other orders (down from $4.99) — with no membership fee.

Meanwhile, Walmart now offers grocery delivery in 50 metro areas across the United States. The company is halfway to its goal of offering the service to 100 metro areas, which equates to 40% of U.S. households.