Reports that Amazon, among other U.S. tech companies, might be interested in British grocery technology company Ocado Group could mean a dramatic shift in the U.S. eGrocery space — and in retail overall.
On Thursday (June 22), after United Kingdom news outlet The Times published a report citing “rumors of bid interest” in Ocado Group from “more than one American suitor” including “technology heavyweights such as Amazon,” shares of the grocery technology company jumped.
Neither Amazon nor Ocado Group immediately responded to PYMNTS’ request for comment.
Should Amazon acquire Ocado Group, it could significantly change the online grocery landscape and escalate the ongoing race between Walmart and Amazon. Regarding the former, Amazon is already gaining share from traditional grocers in shelf-stable, center-aisle categories. By absorbing Ocado Group’s automated fulfillment infrastructure for fresh grocery delivery, the company could see similar gains in perishable and temperature-controlled categories.
“Amazon has built a somewhat unusual, but significant grocery business over nearly 20 years,” Amazon President and CEO Andy Jassy wrote in a letter to shareholders in April. “Similar to how other mass merchants entered the grocery space in the 1980s, we began by adding products typically found in supermarket aisles that don’t require temperature control such as paper products, canned and boxed food, candy and snacks, pet care, health and personal care, and beauty.”
In the same letter, Jassy noted that the grocery category represents a “big growth opportunity” for the eCommerce giant.
While Amazon’s strategy to this point has largely centered on digital channels for these shelf-stable items and rethinking its physical stores to drive sales of perishables, bringing Ocado Group onboard could help Amazon make similar eCommerce gains in these categories.
Additionally, it could also help Amazon shape the competitive landscape. After all, if Kroger, the United States’ largest pure-play grocer, is relying on Ocado Group for its fulfillment centers, and Ocado group becomes part of Amazon, that does not bode well for Kroger.
It would also spell bad news for Walmart, the world’s largest grocer, for which food and beverage has been one of the few categories in which the mega-retailer has held a massive lead over Amazon. According to PYMNTS data, Walmart’s share of the total food and beverage market is about seven times that of Amazon.
The report comes as Ocado Group pulls out of a difficult period. In 2022 the online grocery company slashed its growth predictions amid rapid cost of living increases in the United Kingdom. Ocado later slowed its expansion timeline and put planned openings on ice as it re-strategized. As recently as this past March, Ocado shared that U.S. grocery giant Kroger is slowing down its partnership with the U.K. tech company, extending the timeline of its automated fulfillment center rollout.
Indeed, if investors’ interest is any indication, the company has continued to struggle throughout this year. Even with Thursday’s jump, the stock price remains down 9% year to date and 29% year over year.
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