Ocado Group has terminated 210 more employees from the ranks of the company. Ocado will claim that it’s simply being a good steward of the company by making adjustments to their personnel needs. Ocado will no doubt position the layoffs as being a result of their increased efficiency as a company.
As the British would say, Bullocks! Note to Ocado: You can’t cut your way to profitability.
The majority of the layoffs were from their technology team. Ocado is experiencing decreased interest from customers to rollout additional Customer Fulfillment Centers (CFC). However, Ocado appears to have been selected over AutoStore by McKesson Canada – congratulations!
Founder and CEO Tim Steiner, does a great job of putting on a happy face whenever he speaks to the press about Ocado. Referring to the company as, “The Tesla of Groceries” plays well in the press. Tim is Ocado’s biggest cheerleader.
The brutal truth of the matter is this – many grocery companies have invested in automation to fulfill online grocery orders. However, the results from using the automation isn’t justifying the investment. In addition to Ocado, systems from AutoStore™ have been installed at 9 H-E-B facilities with 30 planned. Amazon is piloting an AutoStore MFC. Albertsons has installed systems from Takeoff Technologies, Inc., and Tesco has installed systems from Dematic.
Kroger, Ocado’s biggest customer, has wisely paused building more CFCs due to the underwhelming performance of the CFCs they’ve already built. Most of the CFCs are operating at less than 50% with some only operating at 15% capacity. Kroger is also faced with the fact that their online grocery customers want same day delivery; something CFCs don’t provide.
I strongly advise grocery retailers to step back and remember this one thing – they have to make a profit. Stated another way, if a retailer loses money on every online order they fulfill, they’re using the wrong model. CFCs and MFCs aren’t enough.
Retailers need to look at their stores, especially storerooms in the back of their stores, and determine the optimal strategy for fulfilling from their stores. Yes, they can use automation.
However, what retailers need to do most of all is invest in their online business to incentivize customers to take advantage of their online model.
Should Ocado find a buyer for the company? Are they the next Webvan or Tesla? Should Ocado replace Tim Steiner as CEO? Is Ocado’s technology obsolete? Why doesn’t Ocado use their data similar to dunnhumby?
Ocado must improve their technology and elevate their culture. Ocado must recruit and embrace new blood and only promote based on merit. Ocado must innovate.
I’m a fan of Ocado but my patience for the company to make a BIG MOVE is wearing thin. I understand Tim’s vision for Ocado. What I struggle with is supporting the current strategy for turning the vision into a reality. Ocado must do more.