How Ocado puts innovation at the heart of online grocery retail

When Paul Clarke, Director of Technology at Ocado said last year that he saw himself as not only the company’s IT boss but also as the head of a high-tech group, it sounded like a grand assertion.

But the rate at which the retailer has led the technological disruption of the grocery retail sector over the last decade has undoubtedly played a big part in helping it to grow its market share.

The company this week reported strong performance in the first half of its financial year, with chief executive Tim Steiner saying that it had seen no negative impact so far from Amazon Fresh’s launch in 69 London postcodes in June which he said could in fact help propel the shift from offline to online shopping.

One of the main reasons why Ocado is often looked upon as one of Britain’s most exciting tech firms is that most of its cutting-edge digital disruption happens in house, with only a small fraction of its digital infrastructure developed by third-party vendors.

Developing a fully automated warehousing and supply chain system supported by robust artificial intelligence capabilities is one of the main areas of focus for Ocado’s technology department. The retailer currently has two fulfilment centres in Hertfordshire and Warwickshire with the third and fourth facilities scheduled to be opened in Hampshire later in 2016 and south west London by 2017.

Ocado secondhands

In keeping with its reputation for innovation, Ocado is currently working with a consortium of European universities on two projects.

SecondHands combines artificial intelligence, machine learning and advanced sensors to develop a robot to assist engineers in its fulfilment centres, while its SoMa initiative is developing a new form of robotic gripper that will be able to pick up products such as cartons, boxes and bottles in the warehouse.

In early 2015, Ocado filed a patent for a new product storage and retrieval system that, according to a company statement, “combines extremely dense storage, rapid retrieval and fast picking of single items”. It also has the ability to interact with a large number of devices in a warehouse and is crucial in the vertical integration of Ocado’s software, electronic and mechanical systems.


The development of an advanced user interface to create a personalised and user-friendly shopping experience, in order to make up in part for the lack of a physical presence, has been another area of focus for Ocado over the years.

Its focus on the mobile experience has also been apparent, with 55% of orders now made via smartphone or tablet.

ocado mobile

Technology licensing

Ocado also generates revenues by licensing its proprietary technology called the Ocado Smart Platform to other retailers such as Waitrose and Morrisons, in order to fulfil their warehousing and logistics needs.

In fact, Ocado’s first annual profit ever recorded in January 2015 was in part thanks to the £45.1m in fees and costs it received from Morrisons.

In the future, the company plans on extending its technology and platform services beyond just the grocery retail market and cater to industries such as airports or mining.

David Sharp, Head of technology at Ocado’s R&D department 10x Stream, said at the Mobile World Congress that once the company had launched its internet of things (IoT) and mobile technology in its fulfilment centre in Andover, it would start selling the systems to other industries.

Head over to ClickZ Intelligence for more details on our UK Grocery Retail Sector Report.

Related reading