ICA/Ocado partnership has started
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On 1st of December ICA has launched the automated warehouse built by Ocado. The project was almost four years in the making as the deal between the two companies was signed in the spring of 2018. Since then the online revenues of ICA have grown rapidly and decreased slightly since then. But the online business is still more than double the size to what it was back in Q2/2018, when the deal was signed.
© ICA Gruppen
The interesting aspect of the Ocado warehouse is it’s location in the Brunna suburb of the Metropolitan Stockholm region. At the first glance Brunna seems to quite far from Stockholm. However, in the statement regarding the opening of the Ocado warehouse, ICA officials say that the warehouse will serve the entire Mälardal region.
The region is quite big geographically. This will result in a lot of driving around by the Ocado lorries. However, this seems to be a part of the Ocado model in general. According to Ocado’s annual reporting, company has rather low 2-4 deliveries per van per hour.
On the other hand, Mälardalen is a populous region with more than 3,5 million inhabitants. This should be big enough population and density to support the Ocado warehouse.
In any case there will be big pressure for ICA to drive volume to the warehouse in order to keep it running efficiently, and eventually help pay back the 100 M€ invested in it.
As ICA drives revenues online in the Stockholm region, the competitors are forced to follow. For Axfood as a public company it is important to be able to show that they maintaining pace in the surge of online orders. On the other hand, Mathem as a start-up it is vital to be able to show to their investors that they are keeping up or driving the transition.
In any case, the share of online in the grocery sector in Sweden will probably grow significantly in the coming years. After the pandemic, the share seems to be stabilising around 5% of the market. It will be interesting to see when the share of online hits 10% of the market.
© ICA Gruppen