Ocado's robot warehouses are now heading to Japan
Ocado has secured another international partnership: the British e-tailer has signed a deal to provide Aeon, one of Japan's biggest supermarket chains, with its online delivery technology.
Innovation
In the last few years, Ocado has signed five other deals with international retailers ranging from Casino in France to the US supermarket giant Kroger.
With 21,000 stores globally and 100 million customers, Aeon is now giving Ocado access to a significant slice of the online grocery market in Asia.
SEE: Special report: How to automate the enterprise (free ebook)
Under the agreement, Aeon will use the Ocado Smart Platform (OSP), which provides an end-to-end software system to operate an online retail business from start to finish.
The deal also includes building the customer fulfillment centres (CFCs) that have made Ocado's fame. These huge "hive-like" warehouses host swarms of robots powered by artificial intelligence that collect items and pick orders.
Ocado did not disclose the exact value of the deal, but said that it expected to shell out £25 million to implement the partnership. Typically, the e-tailer pays for installing its software and robots, and the customer covers the price of building warehouse infrastructure.
Earlier this year, Marks & Spencer bought a 50% stake in Ocado, pouring £750 million into the company and allowing it to further invest in new technologies and distribution centres.
Aeon will also pay an up-front fee to Ocado, as well as ongoing fees proportional to the sales achieved. Ocado said that it expected the deal to cover sales of up to £1.5 billion by 2025.
Although its recent spree of partnerships have caused Ocado to declare the company "an 18-year overnight success", the business is yet to make a profit. In 2018, the business registered a £45 million net loss.
Online grocery is developing at a rapid pace in the Asian continent; international research company IGD forecasted that the market will grow to £230 billion by 2023.
Shirley Zhu, programme director at IGD Asia, said that Japan stands among the countries that will see the fastest growth of online grocery.
"Japan will see online grocery sales strengthen further," he said. "Retailers in Japan are seeking better ways to integrate their physical store networks with online operations."
Ocado's biggest competition is likely to come from Amazon, which partnered last May with Life, another major supermarket chain in Japan, to deliver fresh groceries online.
Starting later this year in Tokyo, the deal will let Amazon Japan handle delivery and payments for Life customers. The companies have set the objective of two-hour deliveries for orders.
SEE: Retailer or future unicorn? Ocado's business model still has many promises to keep
Last year, the Japanese subsidiary of Walmart, Seiyu, also launched a partnership with the e-commerce platform Rakuten to create a new online grocery delivery service.
A Rakuten fulfillment centre was planned to be built in Kashiwa City, in addition to a number of delivery bases located around Tokyo.
Noriaki Komori, executive officer of Rakuten, said at the time that he was expecting the online grocery market to grow because of an "increase in working couples and other changes". Online shopping currently accounts for only 2.6% of the entire food market in Japan.
These numbers show that there is still a lot of space for Ocado to grow its presence in Asia. The company said that the first centre it will build as part of the new partnership will serve the Kanto region of Japan, which includes Tokyo, and will be operating by 2023.