eCommerce Strategy Consultant - Rick Watson - RMW Commerce Consulting

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Kroger + Ocado Not Equal To Target Or Walmart

Kroger continues to test and rollout its partnership with Ocado. I've seen a few things recently.

  • First, it takes them almost 2 years to build a new Ocado facility and each one cost about $55M.

  • These Ocado facilities are not meant to replenish stores. They are built for picking and D2C.

  • One was just completed in Monroe, Ohio outside Cincinnati - a place where they have approximately 150 stores in the regional area already. - This signals to me, they are not going to up fit these stores to be as efficient as a small or medium-format Target store.

  • Also unlike Walmart, they are not investing to install MFC in stores, or invest in real estate to a large degree to greatly expand the capacity of their stores.

  • With this model, they will need to put these Ocado facilities all over America next to their stores?

  • So they are not investing like Target where stores are a node in their network. They are instead putting a completely parallel supply chain path.

  • This will lead to approximately double fulfilment and supply chain costs ultimately, which they will figure out in about 5 years when they change their approach.