Ocado launches first fulfillment center in North America

Dive Brief:

Ocado has completed construction of its first North American customer fulfillment center (CFC) in Vaughan, Ontario, according to a company press release. The CFC will fulfill orders for Canadian grocer Sobeys, which operates e-commerce service Voilà by Sobeys to serve shoppers in greater Toronto.
Testing for order fulfillment from the automated center has begun, and Ocado and Sobeys will implement a phased rollout to customers across the Toronto metro area once the trial phase concludes. The companies did not specify when the pilot period will be complete.
This is the second Ocado CFC to open since March, the company said, with another center recently launching in France. Its next CFC in Canada is planned for the Ottawa area in the province of Quebec. Ocado is also building 20 CFCs with Kroger, the first of which will open next year in Monroe, Ohio.

Dive Insight:

Construction was already underway on Ocado’s $95 million warehouse in Ontario when Sobeys first announced the launch of its dedicated grocery delivery service, Voilà, last May. At the time, the companies said the CFC would offer a selection of 39,000 products and create about 1,500 jobs.

Earlier this month, Sobeys announced it would accelerate the debut of its Voilà service to meet pandemic-fueled demand for online groceries. As retail research firm IGD noted, Sobeys is the last major retailer in the Greater Toronto Area to launch an online grocery service, but it's betting on Ocado's automation-driven efficiencies to give it an edge.

The center's completion is a positive sign for Kroger’s partnership with Ocado in the U.S., which aims to build a fleet of CFCs across the country. Kroger’s investment in Ocado has been criticized for price tag, lengthy construction phase and questions surrounding its speed of service, but soaring e-commerce demand so far this year has the grocer more confident than ever in the tie-up. So far, the company has revealed just six locations for its CFCs.

Kroger will no doubt closely monitor Ocado's performance in Canada and make adjustments to its strategy accordingly.

Equipped with thousands of speedy, efficient robots, Ocado warehouses can manage tens of thousands of orders each week. In a post-COVID world, the technology also promises minimal human contact during the order picking and packing process.

Given the large investment and massive physical footprint that automated fulfillment centers require, however, more grocers have been turning to micro-fulfillment as e-commerce ramps up. The firms that have developed the technology tout it as being more cost-effective and efficient for quick, localized grocery delivery.

The CFC in Ontario is coming online at a crucial time as more people are turning to online grocery amid the COVID-19 pandemic, the companies noted. In the U.K., however, Ocado has struggled in recent weeks as it faced unprecedented consumer demand.