Ahold ups stakes in US gro­cery war with mini-‘robot super­mar­kets’

Business World - - Labor&management -

GRO­CERY GROUP Ahold Del­haize will roll out small, au­to­mated ware­houses to speed or­der pick­ing and cut de­liv­ery times, Reuters has learned, as it re­vamps its ecom­merce busi­ness in re­sponse to ris­ing com­pe­ti­tion in a fast-grow­ing sec­tor.

At an in­vestor event on Nov. 13, the world’s eighth big­gest food re­tailer is set to show­case a part­ner­ship that will al­low it to au­to­mate or­der col­lec­tion at mini “robot super­mar­kets” at­tached to the stores of its U.S. chains like Stop & Shop.

That marks a de­par­ture from its pre­vi­ous strat­egy of re­ly­ing more on man­ual la­bor at big­ger ware­houses, or on a mix­ture of man and ma­chine, to meet on­line food or­ders.

Now Nether­lands-based Ahold Del­haize is team­ing up with Take­off, a start-up which builds small ware­houses that stack gro­ceries to the ceil­ing to save space and use robot arms to as­sem­ble shop­pers’ or­ders for items such as beer, milk, bread and fruit.

The ware­houses serve as con­densed super­mar­kets that can sup­ply sev­eral stores with click-and-col­lect or­ders. They cost about $3 mil­lion to build, which Take­off says is less than the cost of a typ­i­cal store re­vamp.

“Ahold is pre­par­ing for a ma­jor push,” Curt Aval­lone, Take­off’s chief de­vel­op­ment of­fi­cer who led dig­i­tal in­no­va­tion at Stop & Shop un­til 2003, told Reuters.

“If it goes well, both from their side and our side, the hope is we would rapidly be able to build quite a few.”

Ahold Chief Ex­ec­u­tive Frans Muller con­firmed the deal on Wed­nes­day and said it should help ex­pand on­line faster and at a lower cost than with stand­alone ware­houses.

“With the robo­tized so­lu­tion we can op­ti­mize those pick­ing costs and be closer with mi­cro ful­fill­ment to our catch­ment ar­eas. We also re­duce the cost of the last mile,” he said.

Ahold’s shares jumped 5 per­cent on Wed­nes­day as it re­ported thirdquar­ter re­sults that beat an­a­lysts’ fore­casts, lifted by strong on­line sales and growth in its key mar­kets.

ON­LINE GRO­CERY WAR

Ahold’s move is the lat­est salvo in a war for the on­line gro­cery mar­ket that has es­ca­lated since Ama­zon’s takeover of Whole Foods last year. Whole Foods since launched same-day gro­cery de­liv­ery with Ama­zon’s Prime Now in more than 60 cities. Other re­tail­ers are also rac­ing to re­spond: Wal­mart will test Alert In­no­va­tion’s Al­phabot au­to­mated gro­cery pick­ing at a store in New Hamp­shire, and Kroger has teamed up with Bri­tish on­line gro­cery ex­pert Ocado.

Kroger said it will dis­close the lo­ca­tion for the first three U.S. sites out of a planned 20 high-tech Ocado ware­houses in the next cou­ple of weeks. They will take about two years to build and each cost Ocado about $39 mil­lion.

Ahold Del­haize, the op­er­a­tor of U.S. chains such as Giant Food, Food Lion and Han­naford, ac­quired Chicago-based on­line gro­cer Pea­pod in 2000 which is still the mar­ket leader.

How­ever, growth has slowed at Pea­pod since Ama­zon bought Whole Foods and as super­mar­kets — in­clud­ing Ahold’s own chains like Stop & Shop — team up with start-ups like In­stacart to of­fer curb­side pick-up, or one- to two-hour de­liv­ery.

Ahold re­ported U.S. on­line sales growth picked up in the third quar­ter, but Muller said he was still not happy with that.

HAND TO MOUTH

Un­til now, Ahold’s strat­egy has been largely man­ual. At its ware­houses, known as “dark stores,” pick­ers grab items from shelves and put them into crates for pack­ag­ing and de­liv­ery. Ahold has decades of ex­pe­ri­ence in de­liv­er­ing gro­ceries to homes, start­ing in the Nether­lands in 1986 when its Al­bert Heijn chain took or­ders by phone or fax. —

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