Grocery Delivery Shake-Up: Ocado Lays Off 500 While Embracing AI Power
The online grocery giant is leaning towards AI to reduce costs, cutting 500 jobs.
Ocado, the leader in online grocery, has announced that it will cut 500 jobs across its technology and finance department. The company said the move is part of a cost-cutting drive. The online grocery giant is currently facing financial losses, hence the need to leverage artificial intelligence (AI) to boost its engineering team's productivity to address its financial pressures.
Breakups and Layoffs
Ocado employs around 20,000 people, having already cut 1,000 jobs last year. The CEO, Tim Steiner, said the decision was not taken lightly, and the aim is to improve engineering team efficiency through AI tools, reducing future R&D spending. Even with the layoffs, the brand continues to release its next-generation robotic technology to clients including Kroger in the US and Casino in France.
In Ocado's high-tech warehouse in Luton, over one-third of items are currently picked by robots, with that figure expected to reach 70% in the future. Steiner further noted that AI has not only boosted the productivity of warehouse robots but also allowed the company to reduce new employee recruitment despite sales growth.
However, Ocado's share price saw a 17% downturn following the announcement, driven by disappointment over lower-than-expected technology sales growth, projected at 10% this year compared to 18% last year. In addition, delays in the construction of two new warehouses for Kroger impacted Ocado's technology sales.
Seeking Growth
Despite the setback, Steiner emphasized the importance of the US market to Ocado, noting that almost all necessary equipment is already in the US, so changes in tariff policy won't affect the equipment configuration of both warehouses. Ocado reported a pre-tax loss of £374.5 million in the past year, although sales rose 14% year-on-year to £3.1 billion. Improved profitability was offset by impairments on older equipment.
Furthermore, the company encountered difficulties in negotiations with UK retailer Marks & Spencer regarding the sale of shares. M&S stated that it wouldn't pay due to unmet performance targets.
Job cuts are becoming increasingly common in the retail sector, with many processes left for AI tools and modules to work on. Companies like Tesco, Aldi, and Sainsbury have announced job cuts.
