Post by : Badri Ariffin

In a bold move reflecting the changing landscape of online grocery, U.S. retail giant Kroger has announced the closure of three out of eight automated warehouses built with British tech firm Ocado. The decision underscores the mounting pressure from faster delivery players like Instacart and DoorDash.

Ocado, once a pioneer in robotic warehouse technology, supplies retailers with cutting-edge systems to pick and ship online food orders. Yet, Kroger revealed that three of the warehouses did not meet financial expectations. Instead, the company plans to deepen partnerships with rapid delivery platforms that can leverage existing store networks, cutting costs while meeting the growing consumer demand for same-day deliveries.

“Consumers really want their orders fast — ideally within a couple of hours,” noted analysts, highlighting the shift in expectations that automated warehouses have struggled to meet.

While Ocado enjoyed a head start in the U.S., competitors like Instacart and DoorDash have surged ahead. Instacart’s stock has climbed more than 30% since its 2023 listing, fueled by strong quarterly results, while DoorDash shares are up 21% this year. Meanwhile, Ocado’s market value has fallen sharply, losing nearly 90% from its pandemic-era highs.

Some of Ocado’s automated facilities were located in areas where Kroger lacked a strong retail footprint, making profitability difficult. However, locations in states such as Ohio performed better, suggesting the technology can work under the right conditions.

The Kroger setback raises questions about Ocado’s ability to expand its U.S. presence, even as its global partnerships continue, including deals with Aeon in Japan, Lotte in South Korea, and Coles in Australia. Its joint venture with Marks & Spencer in the U.K. remains a rare bright spot, showing significant growth in e-commerce sales.

Experts believe Ocado’s model is most effective in dense, urban markets where multi-temperature automated distribution can reach affluent customers efficiently. Outside such areas, rapid, store-based delivery platforms appear more practical and cost-effective.

As Kroger shifts its strategy toward faster, store-supplied deliveries, the future of large-scale robotic warehouses in the U.S. grocery market faces new scrutiny, signaling a broader rethink of how automation fits into today’s high-speed e-commerce environment.

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