The UK online grocer that’s helping Kroger battle Amazon blew up the biggest misconception about delivering groceries to Americans

Ocado.

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Ocado.
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Dylan Martinez/Reuters

  • Ocado is a United Kingdom-based online supermarket that’s helping Kroger push back Amazon with robot-powered grocery warehouses.
  • David Hardiman-Evans, Ocado’s North America senior vice president, said expanding delivery service in the United States seems like it would be inherently daunting because the country so much bigger.
  • Hardiman-Evans overturned that misconception at a panel on supply chain and logistics at the National Retail Federation’s 2019 Big Show.

NEW YORK CITY – Ocado is a United Kingdom-based grocery store that doesn’t have any physical outlets. But it does have warehouses with robots that can pack up an order of 50 items in just a few minutes. In the third quarter of 2018, Ocado’s revenue growth beat all but three other retailers and racked up 283,000 orders per week in the UK.

In May, Ocado signed a deal with Kroger, the largest supermarket in the United States, to build at least 20 robot-powered grocery warehouses. That partnership gets Ocado into the US market and launches Kroger into the logistics side of the online grocery wars, where it’s competing against Walmart and Amazon.

While it’s quickly growing, online grocery hasn’t quite taken off in the US compared to the UK. Fewer than 2% of Americans buy groceries online, compared to 7.5% in the UK.

One reason for that might be that it’s too challenging to grow and scale an online-only grocery delivery service in the US, the third-largest country in the world by area.

Read more: The CEO of Kroger, America’s largest supermarket chain, explains why the company’s merger with the country’s 6th-favorite grocer puts them in the perfect position to take on Amazon and Whole Foods

David Hardiman-Evans, Ocado’s North America senior vice president, was quick to reject that reasoning during a panel discussion at the National Retail Federation’s 2019 Big Show.

“We are all constantly reminded that we are a small island with a lot of people who live on it,” Hardiman-Evans said.

The executive spoke on a panel about logistics with Bala Ganesh, vice president of corporate engineering at UPS, and Brett Bonner, vice president of research and development at Kroger. Andrew Lipsman, principal analyst of retail and e-commerce at eMarketer, moderated the discussion.

An Ocado warehouse.

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An Ocado warehouse.
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Ocado

Hardiman-Evans recognized that the UK is indeed much smaller than the US. But he said Ocado is “really looking at” serving urban and semi-urban markets in America. Take the Northeast corridor running from Boston to Washington, DC. The cities and suburbs along that strip occupy just 2% of the nation’s land, but they hold 17% of its people.

Interestingly, the first Ocado-Kroger customer fulfillment center isn’t being built near the ultra-urban corridor comprising Boston, New York City, and Washington, DC, but Monroe, Ohio. That’s just outside of Kroger’s headquarters in Cincinnati.

Even in the comparatively minuscule UK, Hardiman-Evans noted that Ocado doesn’t serve every city and region. Remote, rural areas, particularly the far north of Scotland and parts of Wales, aren’t privy to Ocado’s delivery service.

“There will be areas here in the US where there will be a choice,” Hardiman-Evans said.

Kroger launched self-driving delivery cars.

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Kroger launched self-driving delivery cars.
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Nuro

Narrowing those expectations should hasten Ocado’s growth in the US, as well as Kroger’s expansion into the world of online-grocery delivery.

Diana Sheehan, the vice president of retail and shopper insights at Kantar Consulting, wrote last year that that advantageous partnership “allows Kroger to potentially leapfrog both Walmart and Amazon” when it comes to the growing field of technology-powered grocery shopping.

Kroger’s acquisition of Ocado is just one of the adaptations it has made in a shifting retail environment. In 2012, it launched Simple Truth, an organic brand that could be seen as a response to Amazon’s Whole Foods. Simple Truth is now worth more than $2 billion, Kroger CEO Rodney McMullen said at NRF’s Big Show.

Kroger is also rolling out digital shelves and price tags, where customers can scan goods with their phones. The grocer also has launched self-driving grocery deliveries in Arizona. And its Kroger Ship delivery service is free on orders totalling more than $35.