Here's How Ocado is Setting Itself Up to be the Amazon of Online Grocers

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Amazon regularly describes itself not as a retailer, but a technology company, and British online grocers Ocado is now describing itself in those same terms, too - due, in part, to its innovative ecommerce platform.

UK-based online supermarket Ocado was founded by three former Goldman Sachs bankers in 2000. The company was initially a test of concept, and began by working in partnership with Waitrose. It released its own iPhone app in 2009, with an Android version following in 2010. The app allowed shoppers to buy their groceries without being at a PC for the first time. The company still sells Waitrose products today alongside its own branded items.

Today, Ocado is a thriving online business. The company has revenues of PS1,464 million and was named in the top ten of Which? Magazine's best supermarket survey results in 2017.

A Technology Company

Ocado is not just looking to expand the customer base for its online grocery services, but also looking to other supermarkets who may be interested in adopting its smart ecommerce platform.

(Image source: internetretailing.net)

Everything Ocado does - from the mobile app to the way orders are picked in its warehouses - is run by the complex algorithms of its smart platform. The complexity of these algorithms extends to knowing the order in which to place items in shopping bags before shipping - so that four litres of milk doesn't end up squashing a bunch of bananas. Also included in the considerations is making sure all a customers' filled bags arrive at the dispatch point at the same time, which items are ambient, which are chilled, and that load space in the delivery van is maximised.

"A number of standard algorithmic techniques were investigated when the system for scheduling van drops was developed," said James Donkin, General Manager of Ocado Technology. "Dijkstra's algorithm is used to work out the shortest routes from a depot to the different delivery addresses with a simulation run to optimise the journeys. Ocado Technology is not tied to specific techniques, languages, technologies or systems, so the teams are free to be computer or data scientists first rather than being controls engineers."

Machine Learning

The Ocado platform also uses machine learning to solve issues which arise during the day-to-day operations of the platform. For example, machine learning is used to optimise the layout of products in the picking area, allowing for a more streamlined process. The tote takes the bags to the relevant picking station, so the item can be added before moving on in the network. Product locations and the stations at which the picking staff work are entirely controlled by an AI neural network and are adjusted as the system gains experience.

"One of the good things about Ocado is that we have lots of data," explains Donkin. "We have data coming out of everything; sensors, pick stations, robots and so on, and as an experimental project they trained the neural net over a few months, and compared it with other attempts, and it worked. It got the productivity improvement that we were looking for."

Big data, robotics, artificial intelligence and more at every stage of the Ocado process makes its online grocer platform an attractive product to present to other supermarkets.

Online Grocers for Hire

Ocado has already found a few other supermarkets looking to adopt the company's intellectual property. French supermarket Groupe Casino and Canadian chain Sobeys, for instance, have both signed deals to bring the Ocado platform into their own spheres of operation, and UK chain Morrisons already uses the technology. These current deals provide great case studies which will allow Ocado to better promote its platform to other retailers.

Speaking about the deal, Groupe Casino Chief Executive Jean-Charles Naouri said, "This agreement is a major leap in terms of quality: 50,000 food items will be offered in the first stage to customers in the Greater Paris area with precise and speedy delivery at home and through a platform which makes it achievable to do this profitably."

Final Thoughts

In branding itself as a tech company, Ocado is increasing its marketplace to a point where it can sell not only its grocery products, but its incredible technology as well.

The final word goes to Ocado Chief Executive, Tim Steiner.

"We expect [the Groupe Casino] deal to be one of many successful collaborations with leading retailers the world over."

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