Following the recently announced entry of German supermarket Kaufland, continued expansion from Aldi and Amazon's soft launch into food e-commerce, the Australian grocery retail space has never been more competitive.
In response Coles (ASX: COL) is pulling out all stops to hold its ground, with the announcement today it has entered an exclusive partnership with a FTSE 100 company specialising in the advanced technology and systems that raise the efficiency of home deliveries.
Ocado Group's (LON: OCDO) is renowned for its success with perishable goods in particular - a food segment that is notoriously difficult to move well and within a reasonable cost structure.
Coles expects to bring Ocado Group's (LON: OCDO) leading online grocery platform, automated single pick fulfilment technology and home delivery solution to Australia before the end of the 2023 financial year.
This puts Coles on a similar footing to other retailers who have strong positions in their local markets, such as Kroger in the US, Sobeys in Canada, Groupe Casino in France and ICA in Sweden.
With the help of the Ocado Smart Platform (OSP), Coles expects to provide a "seamless digital customer experience" with a greater range, improved product availability and freshness, more regulary delivery windows and increased network capacity at a lower cost.
"Ocado is singularly focused on online grocery shopping, and as a result, has become the leading solution provider in the world," says Coles CEO Steven Cain.
"We are delighted to be partnering with them to make life easier for Coles' customers here in Australia.
"Ocado's ongoing investment and retail partnerships around the world will help us continue to improve our offer into the future."
The retailer will incorporate the platform in two multi-temperature, highly automated customer fulfilment centres (CFCs) in Sydney and Melbourne, each with an estimated annual sales capacity of between $500 million and $750 million.
This extra capacity is expected to approximately double Coles' current home delivery capacity Australia-wide, and is expected to lead to an improved profit margin.
Coles' capital expenditure inclusive of Ocado upfront fees, is expected to be approximately $130m to $150m over the development and construction period, relating to the IT integration of the OSP, non-automated equipment and construction of the CFCs.
Ocado Solutions CEO Luke Jensen says the group is delighted to partner with Coles, with Ocado's platform able to lead a transformation in a profitable and sustainable way as the Australian market changes and consumer needs evolve.
"Already a leading player in online grocery retailing in Australia, we are proud that they have chosen the Ocado Smart Platform to take them to the next level," he says.
"Our flexible, scalable and modular solution will help them bring new levels of convenience, choice and value to Australian consumers."
Ocado CEO Tim Steiner says today marks another big moment in the continuing transformation of Ocado.
"Our unique, proprietary and industry-leading technology is bringing new growth opportunities to retailers around the world and changing the customer experience of grocery shopping," he says.
"Coles is a grocer with a global reputation for innovation and outstanding commitment to their customers, and I am delighted we will be working together in the years to come to reshape the food retail landscape in Australia".
The move follows Coles announcement earlier this year that it would be spending $1 billion on automated distribution centres - one in Brisbane and the other in Sydney.Never miss a news update, subscribe here. Follow us on Facebook, LinkedIn, Instagram and Twitter.
Business News Australia
Get our daily business news
Sign up to our free email news updates.