Ocado is set to shut one of its biggest customer fulfilment centres, putting as many as 2,300 jobs at risk as the online grocery retailer ditches older warehouses in favour of more efficient sites in its search for a path back to profitability.
The firm said its Hatfield centre, which was its oldest facility, would be closed down in anticipation of the opening of a planned new site in Luton. Ocado said it had begun a consultation with staff and hoped to redeploy “as many as possible” to other sites.
CEO Tim Steiner said: “As the online grocery channel grows, our new, enhanced fulfilment centres and technologies will drive a step change in customer experience and efficiency.
“With this capacity coming online, now is the right time for us to halt operations at our oldest facility at Hatfield.
“We have many brilliant Hatfield-based colleagues who have been with us for a long time and are a big part of our journey. We want to keep as much of this talent and experience within the business as possible and expect to retain a large proportion of colleagues impacted.”
Ocado shares fell 0.8% to 501p following news of the site closure. Its shares have sunk more than 50% over the past year, after soaring inflation and a normalising of post-Covid shopping habits led to a 4% fall in sales and a more than £500 million loss in 2022.
Its share of the UK grocery market slipped back slightly from 1.8% to 1.7% in the 12 weeks to 17 April, data from Kantar showed today, as cash-strapped shoppers continued to ditch the larger supermarkets in favour of discounter retailers like Aldi, which surpassed a 10% market share for the first time.
Opened in 2000, Ocado’s Hatfield site was where the company set up its first office. It remains the firm’s global headquarters and home to one of its technology development centres, and is responsible for some 20% of its 400,000 weekly orders.
But the facility has fallen behind in operational efficiency compared to Ocado’s newer distribution centres, which use robots to pick items ordered online. Units picked per hour, a measure of the speed at which the sites can sort items for delivery, averaged 150 at Hatfield but had exceeded 200 at newer centres in Andover, Bristol and Purfleet.
The company’s new ‘600 Series’ robot, unveiled in January, is designed to increase that rate to more than 300, while the opening of a new site in Luton is set to expand the firm’s capacity to 525,000 orders per week.
It also recently won a lawsuit regarding the rights to use its warehouse robots, after another firm claimed they infringed its patents.
The firm said: “The Hatfield CFC remains a foundation stone in the Ocado story, as the company’s first fulfilment centre and a core test bed for the Ocado operating model, now deployed worldwide with Ocado Group’s retail partners.
“However, over the past decade, Ocado has unveiled a raft of new innovations, enabling huge leaps forward in both CFC productivity and customer experience.
“The latest generation of robotic CFCs are consistently achieving well over 200 units picked per labour hour within the facility (‘UPH’), compared to UPH of around 150 for our first generation CFC in Hatfield. The newest sites also have much lower energy usage.”
Ocado has just under 20,000 employees worldwide, according to its 2022 annual report.
Analysts at JPMorgan said: “We see this move as a sensible step towards better efficiency with very limited financial impacts.”
