Casino Group and Ocado Group have announced an international partnership aimed at combining the tech know-how of the British pure-player and the retailing know-how of the French multichannel player. The partnership will initially see Ocado’s OSP (Ocado Smart Platform) deployed on Casino’s supermarket division Monoprix, firstly in Paris, with other major cities to follow suit. This will involve the development of a Customer Fulfilment Center using Ocado’s proprietary technology that will take at least two years to be built, and it will have an initial offering of over 50,000 SKUs. 

 

Ocado’s long-awaited venture

Ocado has deep expertise on the online grocery delivery business being the best online grocery retailer globally. Ocado is reporting 99% order accuracy, with up to 180 items picked by hour, while offering a fantastic and seamless user interface. 

Ocado already managed a successful integration of its Ocado Smart Platform (OSP) with its first partner Morrisons of the UK, back then considered a laggard in eCommerce. Ocado deployed OSP, the proprietary end-to-end solution, managing the entire cycle: from website UX and mobile experiences, to pick, pack and deliver. This flagship system has helped Ocado’s business to flourish, thanks to the operating efficiencies achieved. Morrisons could have served as a test bed to refine the model that now is going to arrive in France.

Ocado’s big idea was to make this proprietary technology a product in and of itself – a unique B2B solution for new businesses trying to enter into the challenging eGrocery space, and help them get up to speed at a lower initial cost.

 

State-of-the-art Capabilities for Casino

Casino has an extended physical footprint in France, especially in proximity retailing. While its eGrocery expertise is already advanced, though varying between banners, its scale is quite limited in comparison to the market’s eGrocery leaders (Leclerc, Auchan). Casino’s eGrocery capabilities already stand out in urban retailing where Monoprix operates one of the best embedded omnichannel shopper propositions (home delivery and click-and-collect). But with increased competition from both pure-play (Amazon’s ‘Prime Now’) and peer multichannel retailers (Carrefour’s ‘LivraisonExpress’) Casino is pressured to improve to maintain its edge in this landscape. This is where Ocado’s solution comes in handy for Casino as it gives it a world-class end-to-end edge over its local competitors to offer a premium online shopping experience, while further lowering costs.

 

Ocado’s Smart Platform infographic, source: Ocado Annual Results

Growth Prospects

Both retailers have committed to invest in developing the partnership. For Ocado, a GBP15 million additional CAPEX is planned for 2018, most of which is likely to help set-up the dedicated CFC (Customer Fulfilment Centre) near Paris. Casino for its part will pay Ocado upfront, development and ongoing fees linked to the capacity utilization of the CFC.

While the partnership is set to first materialize in Paris, Casino’s national footprint will enable its expansion in other major cities where the battle to win the “last mile” is already in full swing. Extending our view to the whole continent, Casino’s European buying alliance (EMD) might also facilitate Ocado’s eGrocery solution deployment to other major European retailers (Kaufland, NorgesGruppen). Furthermore, Casino’s international operations (Brazil, Colombia) could buy into the scheme and help take Ocado outside Europe.

 

KR Point of View

The long-awaited international deal has already been a massive boost to Ocado´s patient shareholders, which saw a 25% bump on the value of their stocks.

From Ocado’s point of view, it is finally the demonstration that its Ocado Smart Platform has wings outside of the UK. For Casino, the differentiating factor of reliable home delivery in urban/high density locations was the missing piece of the puzzle, in a country mostly dominated by the drive model. On paper, it is a win-win situation, ask the stock markets; however we need to see the final costs of the agreement, including the amount of time spent developing the platform, and the final operating fees structure, then we will determine who is the loser, or the winner, if any.

This agreement takes Casino out of the equation for a possible partnership or acquisition with/by Amazon. As a matter of fact, the recent interest of Amazon to further embed itself in the French grocery market might have accelerated the signing of Casino and Ocado's deal.

In the new age of retail as a service, the winners are no longer just retailers, they are platforms. Gone are the days when Ocado was considered exclusively a retailer. Today, it is a company with plenty of technical background experience on its leadership board, which is always keen to embrace innovation, making it a highly technologically advanced platform. This initial CAPEX investment from Ocado has a high long term potential to pay off and boost their profit numbers.

Ocado’s CEO Tim Steiner believes in the potential for more agreements in the future, and a booming online grocery landscape in Europe paints a perfect picture to find new customers for the Ocado Smart Platform.

 

Further Read:

What Does the New Morrisons Ocado Agreement Mean?

The Voice Commerce Wars Continues: New Allies, New Battlegrounds

Alibaba’s Ambitious “New Retail” Philosophy Goes Into “Hyper-Drive”

Amazon Goes Shopping in France: Evaluating the Acquisition and Partnership Scenarios

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