Coop countering in the online grocery fulfilment

Image source: Isidor Beslic, Dagligvarunytt

As more and more companies are investing in centralised fulfilment and automation, Coop Sweden has announced that it will close down it’s centralised picking location in Kungens Kurva, Stockholm. According to an article in Dagligvarunytt, Coop will move the online order fulfilment to six stores.

According to the Dagligvarunytt article the new store has a 1 100 square meter space in the back office of the store. The picking of the online orders will be done in this “dark store” setting behind the normal store.

Has Coop gone mad or this a smart strategic move?

Online grocery picking is not purely about automation. A big part of the process can be done rather efficiently with manual labour. Therefore, it is good to consider the benefits and disadvantages of the model used by Coop:

Disadvantages:

• slower picking to more automated/centralised models

• efficiency from around 70-90 rows per hour to 120-140

• very labor intensive, Coop talks about a 150 person team

• shelving faster, no product substitutions

• still a far cry from the centralised models of Oda and Mathem

Benefits:

• minimal capital investment required compared to an MFC (Tesco: ~£6 million per MFC)

• Kesko has been talking about an investment of “tens of millions”

• capacity is rather high: 650-700 orders per day

• Tesco’s UFC’s can handle 1 000 orders

• enables Click & Collect

• speed of service: customers can get their orders rather rapidly, especially via Click & Collect

• smaller delivery area

  • with proper volumes per store, the delivery can be rather efficient

  • from 4-5 per hour up to 6-7 maybe?

• easy to scale up or down, as was seen during the pandemic

• collaboration with the store can help to avoid missing products or reduce the waste (from the store or the online operation)

All in all, the model by Coop is certainly not the most optimised or media-sexy. However, it would not be the first time when it pays to zig when others zag.

This is probably not the end game for Coop with regards to online fulfilment. This is a flexible and capital light way of expanding online grocery fulfilment. With higher volumes and probably slightly changed customer demand, Coop can rather easily change tactics to other kinds of fulfilment in the future.