When is a retailer not a retailer? When it’s a technology company. Amazon is well known for telling interview candidates that it is a technology company and UK grocer Ocado sees itself in the same light – as a business which is as much a technology firm as it is a retailer. Emma Herrod and Ian Jindal spoke to Ocado Technology general managers Matt Soane and James Donkin about how this arm of the business has evolved.
In its past financial year, Ocado spent £26.8m on internal development costs on its proprietary software and a further £7.5m specifically on computer hardware and software. A further, £19.7m went on developing its next generation fulfilment solution, which will be used in new Customer Fulfilment Centres (CFCs) and for Ocado Smart Platform customers. A new, automated warehouse went live in Andover with robots picking products for customer orders in parallel, speeding up order pick times from a couple of hours to between five and 10 minutes.
In a corner of the warehouse in Hatfield, close to the company’s headquarters and the offices of its technology operation, a range of robotic hands are now being tested that can pick up different items, from products in cardboard boxes and plastic bottles through to individual apples.
Ocado is known as a grocery retailer which started out delivering Waitrose goods as an online-only supermarket in 2002 and now fulfils 230,000 orders to an active customer base which last year rose almost 14%. Retail revenue in the year to 27 November 2016 reached £1,171.6m, an increase of 13.3% on the previous year.
The company also operates its own non-food businesses: in pet food site Fetch and kitchen goods firm Sizzle, as well as multichannel, luxury health and beauty company Fabled, which it launched as a joint venture with Marie Claire in 2016.
Last year, it also implemented an in-store order picking system for Morrison’s, the UK’s fourth largest supermarket, which uses Ocado’s Smart Platform ecommerce and order fulfilment solution.
And therein lies the concentric workings of a retailer which is also a technology company: the Ocado Smart Platform, which is effectively a white label version of Ocado with some physical store applications added such as grocery pick-from-store and click and collect functionality.
Ocado Smart Platform
While the business is growing its grocery business and expanding into new areas of general merchandise, it is also seeking customers for its technology platform; all of this along with a drive to continually innovate, to optimise “to the nth degree”, increasing operational efficiencies, improving the customer experience and automating repetitive, manual processes to make the roles of the people working at the company more interesting. (Its use of machine learning to prioritise in-bound customer emails is written about elsewhere in this issue of InternetRetailing and the Ocado Technology team is continually looking at areas of the business which can be improved and optimised today as well as in the future.)
The company has a willingness to disrupt itself and this becomes obvious looking around the Customer Fulfilment Centre in Hatfield, which the company claims is the most efficient grocery fulfilment centre of its kind. What has been key to this is the ability to upload code to warehouse management systems on a daily basis so the team can quickly test and further optimise operations, explains Matt Soane, general manager, Ocado Technology.
While Ocado does work with external partners, a lot of development is carried out in-house on things “where they will make a difference”. Soane explains that all of the software in the warehouse has been developed by the firm with the hardware specified by it, too.
The company realises that there’s no need to re-invent systems which work perfectly for its requirements. Commodity elements, such as databases, are bought in, but it will write control systems, data science algorithms, websites and supply chain systems which are unique to the Ocado offering. “Vendors are used to supplying the things we don’t want to do ourselves. That’s their USP,” says James Donkin, general manager, Ocado Technology. Systems need to be scalable, work in a warehouse and be grocery specific.
Click here to read the rest of this interview, which appears in the latest issue of InternetRetailing Magazine. And click here to explore the rest of the issue.