Battle of the Smart Warehouses!
Part 1
In America, Amazon is known as an e-commerce giant, one that has been leading the competition in almost all categories. However, Amazon is now facing stiff competition in Ocado, the UK online grocer. Ocado distributes groceries to customers using its highly developed and efficient robotics system, known to move about 3 times as fast as the one Amazon uses.
Ocado is used to selling its products in the UK, where consumers purchase about 6 -7% of their food online. Americans, however, only purchase about 2% of their food online - a tendency which Amazon has been able to take advantage of.
Nevertheless, Ocado is now attempting to sell its products outside of the UK. They have recently made a deal with Kroger, the United States’ largest supermarket chain and second-largest general retailer. This deal includes building 20 automated warehouses over the next couple years, which could create fierce competition for Amazon.
Amazon, which has partnered with Whole Foods, is likely to attempt to propel itself ahead of Ocado in the race for online grocery domination, a competition in which they had previously not had to invest much. This recent change of strategy is undoubtedly a response to Ocado’s emergence as a major threat to the company’s online grocery sales in the United States. Indeed, Ocado’s warehouses are currently more efficient than Amazon’s, and its partnership with Kroger will enable them to begin operation in the United States within the coming years.
Yet along with the high efficiency of Ocado’s warehouses, or food distribution centers, comes an extremely high cost. The building and installation of new warehouses will cost Kroger approximately 400 million dollars each, which will require large amounts of additional capital.
Amazon and Ocado’s matchup will be an interesting one to watch within the coming years, as Ocado has recently unveiled plans to build warehouses in Ohio, Central Florida, and the Mid-Atlantic region, with more to come.
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Written by Paul Luu Van Lang, Edited by Alexander Fleiss