One of the most interesting grocery markets in the world is located in Australia. Woolworths Group, is the dominant grocery retailer followed by Coles Group. The two retailers have engaged in some of the most ferocious battles ever seen in the grocery industry. I’ve been writing about the market since 2013, and I’ve spoken frequently with the press in Australia about the topic.
In 2018, I began to receive calls from consultants and executives from Coles who asked me for my opinion about what they should do related to their fulfillment strategy. The calls continued through 2021. I found the calls to be interesting but also concerning. I could tell that a small group within Coles, including Steven Cain former CEO of Coles, believed that a partnership with the Ocado Group was the best strategy. I didn’t. Through multiple phone calls, I stated the following:
1. Ocado is a great company but it isn’t the best choice for Australia’s grocery market. Don’t just consider Ocado. Utilize a hybrid strategy of Ocado and MFCs or just MFCs without Ocado. Same Day delivery is key.
2. I advised Coles to invest in opening automated micro-fulfillment centers (MFC) using systems from Alert Innovation, AutoStore™, Attabotics Inc., Takeoff Technologies, Inc., Fabric, etc.
3. Attach MFCs to Coles stores or build stand-alone MFCs among clusters of Coles stores. Multiple MFCs installations can be managed at the same time increasing the speed for completing the project.
4. To minimize costs, use the stores to fulfill online and click and collect orders. Lease vans and hire contractors to make deliveries or use gig workers.
My opinion was valued by the individuals who understood Australia’s grocery customers. The individuals pushing Ocado disagreed with me – they wanted an Ocado-only strategy. Ocado was selected.
This article from The Australian Financial Review reports that Coles’ project with Ocado has doubled in costs and is several years behind schedule. As I warned in 2018 through 2021, Coles customers prefer click and collect, and they want same-day delivery for groceries. Coles has partnered with Uber Eats for grocery delivery and the company is struggling to meet same-day grocery fulfillment and delivery.
Woolworths has opened multiple numbers of MFCs and they use their stores for fulfillment of grocery orders. Once again, Woolworths has out-managed Coles.
I advise Leah Weckert, CEO of Coles, to hire an independent 3rd party to conduct an audit of the Ocado project, including a detailed audit of the decision-making process for selecting Ocado and the proposed strategy. Has Ocado become an albatross for Coles? Leah needs the facts.
Side note: Coles and Woolworths should contact Mark Edwards, the CEO and Founder of 345 Global. The software from 345 Global will provide both retailers with best-in-class integrated store planning.
