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* Retailers looking to automate after COVID
* Ocado has partnerships in eight countries
* Automation to have big impact on jobs
By James Davey and Kate Holton
ERITH, England, Oct 25 (Reuters) - In a warehouse in
London's suburbs, thousands of robots swarm in a mesmerising
dance across the top of a grid the size of six football pitches,
racing to supply groceries to the British capital's shoppers.
Built by UK online supermarket pioneer Ocado, the
washing-machine sized bots have caught the eye of international
retailers battling a shortage of workers and rising wage demands
in a post-pandemic world.
It has already struck deals to provide its technology to
supermarket groups in eight countries including the United
States, Japan and France. In a recent three-week window it
hosted prospective clients from another five countries.
Luke Jensen, CEO of the London-listed company's technology
arm, Ocado Solutions, told Reuters they want to automate the
entire process from farm and factory gate to shopper's fridge,
while driving up productivity at its sites known as customer
fulfilment centres (CFCs).
With plans in place to eventually automate most manual
warehouse jobs, Ocado's success could have profound implications
for labour in the retail industry globally.
"At a ten year horizon we would expect most lower value
added tasks to be performed by technology and for the jobs in
CFCs to be focused on supervision and engineering," he said.
Founded two decades ago by three former Goldman Sachs
bankers, Ocado has long faced doubts that it can turn a
sustainable profit - in 2017 and 2018 it was often the most
shorted UK stock, according to analytics firm Ortex.
But the international deals have changed the conversation:
its shares are up around 700% since it struck its first major
partnership in late 2017, giving it a market value of $19
billion.
It now needs to deliver - profit at the technology arm will
be held back by the costs of building partner sites, before
Ocado starts earning a portion of sales once operational.
At its largest site, the $310 million building in Erith,
southeast London, more than 2,000 robots whizz around the steel
and aluminium grid covering four metres a second, replacing the
humans who once retrieved groceries.
Workers below pack the goods, but a robotic picking arm is
machine learning the task, and will eventually replace them.
The arm can already handle 15% of Ocado's product range, a
figure the company expects to reach around 50% in two years,
with 80% "absolutely feasible" in the longer term. Retail
partners will be using it within three years, Jensen said.
It is also working to automate the arrival of goods into
CFCs and the loading of customer orders onto delivery vans, and
eventually wants to use autonomous vehicles to move goods
between suppliers, warehouses and homes.
TOP PRIORITY
While retailers in Asia like JD.com have already
automated the whole warehouse process, IGD analyst Simon Mayhew
said Ocado led the way in grocery automation, where goods are
fragile and can require chilled or frozen temperatures.
Jensen says automation is "the number one boardroom
pre-occupation for retailers", driven not just by the shortage
of workers but also an acknowledgement that the pandemic has
moved the dial on online groceries.
Analysts expect online ordering to make up 15-20% of total
grocery sales in major markets in the medium term.
Many grocers have concluded that in densely populated areas
the old model of solely store picking online orders for delivery
may not be the best use of capital.
Firms such as Walmart and Tesco have been
working with tech groups such as Dematic, Fabric and Alert
Innovation, mostly with a focus on smaller-scale micro
fulfilment centres, often next to stores.
Norway's AutoStore, a closer rival to Ocado, works with
brands including British supermarket Asda, and Gucci.
But while retail giant Amazon has automated many
parts of its operations, its Whole Foods staff still largely
pick online orders in store.
Ocado says that while others can offer services such as
webshop design, routing systems or warehouses, only it can join
them all together, delivering metrics such as food waste of just
0.4% of sales versus 2.5%-3% for most supermarket groups.
Erith's productivity is already 25% higher than that of
Ocado's first British CFC and Jensen sees scope for further
gains of 50-70%.
Burt Flickinger, head of retail consultancy Strategic
Resource Group, says credibility gained from Ocado's success in
the UK and the U.S. affirms it can operate anywhere.
It has partnership deals with America's biggest grocery
retailer Kroger, Casino in France, Aeon
in Japan, Coles in Australia and Auchan's
Alcampo chain in Spain.
At Erith, Jensen is already thinking about taking Ocado's
technology beyond grocery retailing into general merchandise.
"It's definitely an option longer term," he said.
(Reporting by James Davey and Kate Holton; editing by Guy
Faulconbridge, Kirsten Donovan)
