Asda has agreed a deal to update its online grocery store and home deliveries from next year using technology from Ocado.
Ocado software will be used to support Asda’s grocery website and deliveries from its stores and “dark stores” – smaller warehouses that are not open to the public – from early 2027, the companies announced on Friday.
Asda, Britain’s third largest supermarket, will also use Ocado’s underlying technology to manage deliveries of orders placed through apps such as Uber Eats, Deliveroo and Just Eat, and for click-and-collect services through the supermarket’s website and apps.
The deal means Ocado will soon provide the technology supporting deliveries at three of the UK’s biggest grocers.
In the UK it already runs the online supermarket Ocado.com as a joint venture with Marks & Spencer, which sells its products via the site. It also manages Morrisons’ website and the majority of its online deliveries, from stores and a central warehouse. Ocado previously partnered with Waitrose, which sold its goods online via Ocado.com.
Asda will not use Ocado’s robot warehouses in the UK or sell via the Ocado.com website. Using Ocado’s systems will help Asda modernise its website and step up fast-track deliveries and click and collect.
The deal is likely to be welcomed by shareholders in Ocado, which has had several setbacks in its efforts to sell its hi-tech vision of grocery delivery around the world.
Shares in the technology company jumped almost 14% at one point on Friday, and were up 5% by early afternoon, as analysts suggested the software-based deal with Asda might be a first step towards a closer relationship under which Ocado robots could operate in the supermarket’s warehouses.
Asda will be hoping the partnership arrests recent sales weakness under its majority owner, the private equity firm TDR Capital and Mohsin Issa, and help it fight back against the German discount chains Aldi and Lidl, which do not sell groceries online. Asda’s UK grocery market share has dropped from 14.3% before its 2021 takeover to 11.5%, according to Kantar data, leaving it just above Aldi on 10.8%.
On Friday, Asda reported that sales fell 1.5% to £5bn in the first three months of this year. However, the figures suggested an improvement in trading, with sales at established stores down 1.3%, after adjusting for the timing of Easter, compared with a 4.2% decline in the previous three months.
Allan Leighton, the executive chair of Asda, said: “This progress is due to the stabilisation of our core systems, which has enabled us to deliver ongoing improvements in availability, price and customer satisfaction.”
He added that the new partnership with Ocado would “significantly improve our online business. It will bring the best-in-class technology and, importantly, enable us to compete more strongly in this fast-growing channel. This is a clear statement of intent and will put us in a much stronger position for the future.”
Ocado robots mostly operate in large warehouses to fill shopping baskets for delivery. Amid heavy competition from cheaper services such as JustEat and Deliveroo, it has recently developed a broader collection of services to enable retailers to deliver straight from their stores.
Ocado has rarely made a profit since it was founded 26 years ago. During the Covid-19 lockdowns a wave of online shopping pushed its stock market value to more than £22bn. Before the Asda deal was announced, its share price had collapsed from more than £27 to £2.08.
Some of its partnerships have proven problematic. In November, the Kroger supermarket chain in the US announced it was closing three warehouses that used Ocado’s equipment. Two months later, Ocado revealed that Sobeys in Canada was closing its Calgary facility.
Tim Steiner, Ocado’s chief executive, said: “We’re delighted that Asda has chosen Ocado to support the next phase of their online growth. The UK remains one of the world’s most competitive and fast-evolving online grocery markets, where technology, scale and continuous innovation are increasingly important for retailers looking to maintain leadership positions.”
