Lotte Shopping to use Ocado technologies in warehouses

Lotte Shopping will invest 950 billion won ($670.8 million) by end of 2030 to build fulfillment centers for grocery deliveries, signing an exclusive agreement to become the only Korean partner for Ocado, an online grocery retailer based in Britain.

Kim Sang-hyun, CEO of Lotte Shopping, left, shakes hands with Ocado Group CEO Tim Steiner after celebrating the signing of an exclusive partnership agreement on Tuesday. [LOTTE SHOPPING]

Lotte Shopping will invest 950 billion won ($670.8 million) by end of 2030 to build fulfillment centers for grocery deliveries, signing an exclusive agreement to become the only Korean partner for Ocado, an online grocery retailer based in Britain.

The 950-billion-won investment will be used to purchase land to build fulfillment centers and to pay commissions to use Ocado’s fulfillment center automation technologies, according to Lotte Shopping on Tuesday.

Lotte Shopping says it signed an exclusive agreement with Ocado, which means it will become Ocado’s only Korean partner.

London-listed Ocado employs various technologies to make grocery deliveries at its fulfillment centers — referred as Ocado Smart Platforms — more efficient. It also licenses its fulfillment center automation technology to global retailers, which includes companies such as Kroger in the United States, Australia's Coles and Sobeys in Canada.

Using its demand forecasting system, Ocado predicts items customers are likely to order and pre-stocks them at each fulfillment center to make the delivery process shorter. The company is also known for its automated warehouses, with robots used to pick out products ordered from the customers and sending them to be packaged.

A fulfillment center operated by Ocado in Bristol [LOTTE SHOPPING]

It provides same day deliveries for select items, delivering products from smaller in-store fulfillment centers closer to urban areas to make the delivery process shorter.

Ocado will provide its robots and the software needed to operate them to Lotte Shopping. It will also be responsible for maintenance. Ocado is developing more technologies to optimize deliveries in Korea, considering the country has different geographical characteristics — such as dense urban areas — compared to other countries it partners with.

Following the investment, Lotte Shopping will open its first fulfillment center equipped with Ocado’s technologies in 2025. The company plans to have a total of six up and running by end of 2030.

With new fulfillment centers, it aims to log annual sales of 5 trillion won from its online grocery delivery business in 2032.

Lotte Shopping also plans on using collected customer data to build additional services that recommend other products based on grocery purchase histories.

“We are happy to partner with Ocado, one of the most innovative companies in the world, and offer a new online shopping experience to our customers,” said Kim Sang-hyun, CEO of Lotte Shopping. “Through the partnership, I hope Lotte’s retail business can enhance its competitiveness in the grocery business and become the leading player in the market.”

BY LEE TAE-HEE [lee.taehee2@joongang.co.kr]