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I work in this exact space (online grocery retailer in Europe). We're profitable and one of the few companies to be so in the sector - many online divisions are

I work in this exact space (online grocery retailer in Europe). We're profitable and one of the few companies to be so in the sector - many online divisions are losing money and being bankrolled by the parent company with physical stores. Alternatively, burning VC money. The thing that's wrong with Ocado's technology is that it's ridiculously expensive and tailored for huge FC's (fulfillment centers). The problem with that is that it needs to serve a large population base to be effective and that's hard - in dense metros, the driving times are much longer despite smaller distances. In sparse metros, the distances are just too long. In our experience, the optimal FC size is 5-10K orders/day, maybe up to 20K/day in certain cases, but the core technology should certainly scale down profitably to 3-5K. Ocado solves for scaling up, what needs to be solved is actually scaling down. There are a lot of logistical challenges outside the FC, especially last mile and you need to see the system as a whole, not just optimize one part to the detriment of all others.

algo_trader 10mo ago
> FC size is 5-10K orders/day, maybe up to 20K/day in certain cases, but the core technology should certainly scale down profitably to 3-5K. deja-vu from the e-scooter business. even with a good product, its just not profitable/scalable enough
- karamanolev 10mo ago
  Ours is profitable enough. And it can scale but covering more area with FC's of a profitable size. Additionally, market penetration of online grocery shopping is growing rapidly and has no reasons (that we see) to stop growing (as a % of all grocery shopping).
bob1029 10mo ago
The grocery business has razor thin margins. There is no dry sponge remaining to absorb this kind of massive fixed cost. The business is highly variable. I think scaling up would be the only way out of this problem. Scaling down only makes it worse.
- criddell 10mo ago
  Or you sell every bit of data you collect.
  - karamanolev 10mo ago
    We don't need to do that at all. Essentially zero. Whether we'll do it in the future - I don't know. It's not really under my control, but right now we can be profitable without needing it. And we're price-competitive with the large grocery stores.
- karamanolev 10mo ago
  No true for us at least. Well kind of - the scale I'm mentioning is required if you're doing your own tech like we do. We develop all our core tech - the website, the logistics operation automation, the last mile app and scheduling. If we can do that profitably, what do you think will happen a company like our develops a few FC's of similar scale using the same technology? The margins are thin, but not as razor thin as you might think. The grocery stores have a lot of overhead that we don't. Additionally, people realize that not only is that the case, but they also save from their own costs - just driving to the store is not free, let alone the time you spend, which is massively cut down.
NicoJuicy 10mo ago
They literally copied their supplier ( autostore ). Unfortunately, auto.ol shared secrets with them, Ocado abused that in court. Literally, Fuck Ocado. I wouldn't trust them.
- bitdivision 10mo ago
  Some context: https://archive.ph/Apfdv https://archive.ph/Apfdv Autostore ended up paying Ocado? How did Ocado abuse them?
  - eurekin 10mo ago
    Yes, AutoStore lost most important cases in US (ITC) and UK's High Court.
  - NicoJuicy 10mo ago
    Because autostore shared trade secrets with Ocado. The lawsuit was found to be not valid. Note: Ocado was a customer of Autostore in 2012 and just copied them. Sharing IP basically invalidated the lawsuit.
    - NicoJuicy 10mo ago
      https://www.blackstonechambers.com/news/autostore-technology-as-v-ocado-group-plc-ors/ https://www.blackstonechambers.com/news/autostore-technology... Autostore disclosed their design externally before the patents. So the patents were "invalidated" by themselves
      - admirethemeyer 10mo ago
        At least read what you’re posting: AutoStore claimed that several of its European patents covering cube-storage robots and grid-based systems were infringed by Ocado’s Smart Platform robots and storage grid. The judge looked closely at the “central cavity” robot patents (EP 2 928 794 and EP 3 070 027) and two other related patents and compared them to earlier disclosures and designs. He found that the claimed inventions lacked novelty and/or an inventive step, meaning they did not add enough new technical idea over what was already publicly available, so the patents were revoked. Additionally, even if the patents were not invalidated, the judge found that Ocado did not infringe them, even if they were valid. Specifically, Ocado’s robots and grid as actually built and used did not fall within the wording of AutoStore’s patent claims. The court concluded that, on proper claim construction, Ocado’s design did not use several key features required by the claims, so there was no infringement in any event. This is all in the judgment. Finally, Autostore had to pay Ocado $256M USD: https://www.therobotreport.com/autostore-to-pay-ocado-256m-in-patent-lawsuit-settlement/ https://www.therobotreport.com/autostore-to-pay-ocado-256m-i...
simgt 10mo ago
Where are you operating? I live in a dense European city and I don't know a single person who orders groceries online. Smallish shops with bike racks in front of the door are simply too convenient, seems hard to beat. Next few days shopping can easily be done in 15mn on the way back home.
- istinetz 10mo ago
  judging by his name, he is perhaps in Sofia. I am also living here, and can confirm that many middle class people order groceries online.
- dottjt 10mo ago
  Maybe it's different in Europe, but at least in Australia you end up paying more at smaller shops, so I tend to avoid them. Is this the case in Europe as well?
  - londons_explore 10mo ago
    Yes - groceries in a small shop are easily 2x the £/calorie in the UK compared to a big superstore.
    - simgt 10mo ago
      Are you comparing the cost of strictly identical products or something else? I'd be very curious to have some sources if you have any
      - londons_explore 10mo ago
        No - small shops tend to sell mostly expensive branded products in smaller packets, whereas superstores sell larger packs of unbranded products.
        jnd-cz 10mo ago
        In my country and city the small shops are largely stocked from buying the same things from larger shops combined with their own resupplying network. So you can either walk 100m to the corner shop, pay couple dozen % extra or walk 500m to the nearest Lidl or similar and save on basically the same products.
mikaoj85 10mo ago
> Ocado solves for scaling up, what needs to be solved is actually scaling down. This has been solved by Pio (by AutoStore)
- karamanolev 10mo ago
  Autostore is great, but it's a small component for a business to be profitable end-to-end. Maybe 20% of the whole thing.
ErroneousBosh 10mo ago
I see Ocado vans driving up to deliver on the Isle of Skye, which I guess must come from either Fort William or Inverness. I can't imagine it's especially profitable to deliver a bag of food in a refrigerated van to somewhere that's nearly four hours driving each way.
- rsynnott 10mo ago
  I'd guess that they make a loss on this, but that they accept some losses in exchange for being able to say "we cover the whole country!" This is the case for pretty much any delivery business.
  - ErroneousBosh 10mo ago
    Meanwhile the AirBnB dwellers continue to not spend a penny locally while taking up valuable housing. They're actually worse than the motorhome brigade.
jon-wood 10mo ago
I think there's a space for something in between Ocado and Uber Eats, in the 2010s I worked for a startup where you could book an Ocado style delivery slot for the next day from a bunch of different butchers, bakers, etc and then we'd send a van round to collect from all of them and deliver it to you. Annoyingly they ran out of money just a little bit too soon, I'm pretty sure if they'd managed to hold out until 2020 they'd have seen a huge increase in sales as everyone fully got on board with online delivery and been laughing. I think the big win with that model vs Ocado is that scaling down is fine, you work with whatever shops are in the area and don't need to deal with building fulfilment centres. Maybe you need a car park somewhere to put the vans overnight. Scaling up is a case of moving into different areas, or onboarding new shops. Absolutely agreed that last mile is a nightmare but we mostly had it down I think, the biggest pain there was that we were relying on a bunch of third parties to pack an order, and if any of them got something wrong we ended up with an unhappy customer on the phone and needing to deal with it.
- mikkupikku 10mo ago
  VC reinvents the milk man (who used to deliver much more than just milk.)
  - RandallBrown 10mo ago
    Our milk man still delivers a lot more than just milk.
- no_wizard 10mo ago
  >the biggest pain there was that we were relying on a bunch of third parties to pack an order, and if any of them got something wrong we ended up with an unhappy customer on the phone and needing to deal with it. Why not have drivers verify the order with the store? Like have the store folks walk through the pick ups. It might be slower up front, but it would save lots of time and money for everyone in the long run. One of those slow is smooth and smooth is fast situations. Alternatively, the drivers should have a book they could match pics to items perhaps The other thing I wonder if it would be possible, would be to reduce revenue share for stores that routinely had issues with accuracy, but that means you'd need leverage, and you simply may not have it.
Onavo 10mo ago
So who's their target customer? Are we talking about Amazon/Temu scale here?
- karamanolev 10mo ago
  Seems so, but the economics for groceries don't work like that since you don't ship a slice of meat and a bottle of milk like you ship a 512GB SD card or a smartphone.
PeterStuer 10mo ago
I've done a few projects in (traditional, not pure ecommerce) retail, and in my experience it is a very low margin business. This contrasts sharply with being an innovator in the robotics space, which typically is extremely capital intensive with very long ROI trajectories.
- karamanolev 10mo ago
  We're proving that automation can happen in that space profitably if done right - carefully, surgically and with a small, focused team. There's Autostore in that space and that system has a massively different economics than Ocado's solution, despite the similarities.
  - eurekin 10mo ago
    So, what you're doing? Sounds great!
    - karamanolev 10mo ago
      Right now we're doing two robotic arms and a lot of conveyor belts - some conveyors serve as just transport, others storage of order totes and some others serve a dual purpose (they move the totes but due to the length we let them buffer for a bit). Additionally, a lot of software automation to help people.
      - fredfilz 10mo ago
        Hey @karamanolev, Do you work at Ocado? Ever thought of working in AV? We're a young startup in SF, have a couple customers, just raised our seed, and are now expanding our team with some very critical high-ownership founding engineers. Some info about us: https://crewline.ai/ https://crewline.ai/ https://crewline.ai/blog/crewline-manifesto https://crewline.ai/blog/crewline-manifesto LMK if this is of interest. -Freddie freddie@crewline.ai
  - PeterStuer 10mo ago
    Automation in in logistics and warehousing has been happening extensively for decades. However, with margins in large scale grocery retail are often far below 5%, any significant investment in unproven innovation will impact profits in a way that will be extremely noticeable to boards and shareholders. This isnot to say it can not be done, as clearly the other side of the coin is that operational efficiency gains are also much more noticeable on the bottom line than in higher margined businesses, but it is higher risk/reward for low margin sectors. This will favor developing/proving the early TRL stages in new entrant or niche players, then buying out the successes when they hit early maturity.
didntknowyou 10mo ago
love ocado purely for the reason it's cheaper than other services. i suspect they are subsidising each order to build long term customer behaviour but it's a gamble when customers can eadily switch as the moat is purely pricing

algo_trader 10mo ago

> FC size is 5-10K orders/day, maybe up to 20K/day in certain cases, but the core technology should certainly scale down profitably to 3-5K. deja-vu from the e-scooter business. even with a good product, its just not profitable/scalable enough

karamanolev 10mo ago
Ours is profitable enough. And it can scale but covering more area with FC's of a profitable size. Additionally, market penetration of online grocery shopping is growing rapidly and has no reasons (that we see) to stop growing (as a % of all grocery shopping).

bob1029 10mo ago

The grocery business has razor thin margins. There is no dry sponge remaining to absorb this kind of massive fixed cost. The business is highly variable. I think scaling up would be the only way out of this problem. Scaling down only makes it worse.

criddell 10mo ago
Or you sell every bit of data you collect.
- karamanolev 10mo ago
  We don't need to do that at all. Essentially zero. Whether we'll do it in the future - I don't know. It's not really under my control, but right now we can be profitable without needing it. And we're price-competitive with the large grocery stores.
karamanolev 10mo ago
No true for us at least. Well kind of - the scale I'm mentioning is required if you're doing your own tech like we do. We develop all our core tech - the website, the logistics operation automation, the last mile app and scheduling. If we can do that profitably, what do you think will happen a company like our develops a few FC's of similar scale using the same technology? The margins are thin, but not as razor thin as you might think. The grocery stores have a lot of overhead that we don't. Additionally, people realize that not only is that the case, but they also save from their own costs - just driving to the store is not free, let alone the time you spend, which is massively cut down.

NicoJuicy 10mo ago

They literally copied their supplier ( autostore ). Unfortunately, auto.ol shared secrets with them, Ocado abused that in court. Literally, Fuck Ocado. I wouldn't trust them.

bitdivision 10mo ago
Some context: https://archive.ph/Apfdv https://archive.ph/Apfdv Autostore ended up paying Ocado? How did Ocado abuse them?
- eurekin 10mo ago
  Yes, AutoStore lost most important cases in US (ITC) and UK's High Court.
- NicoJuicy 10mo ago
  Because autostore shared trade secrets with Ocado. The lawsuit was found to be not valid. Note: Ocado was a customer of Autostore in 2012 and just copied them. Sharing IP basically invalidated the lawsuit.
  - NicoJuicy 10mo ago
    https://www.blackstonechambers.com/news/autostore-technology-as-v-ocado-group-plc-ors/ https://www.blackstonechambers.com/news/autostore-technology... Autostore disclosed their design externally before the patents. So the patents were "invalidated" by themselves
    - admirethemeyer 10mo ago
      At least read what you’re posting: AutoStore claimed that several of its European patents covering cube-storage robots and grid-based systems were infringed by Ocado’s Smart Platform robots and storage grid. The judge looked closely at the “central cavity” robot patents (EP 2 928 794 and EP 3 070 027) and two other related patents and compared them to earlier disclosures and designs. He found that the claimed inventions lacked novelty and/or an inventive step, meaning they did not add enough new technical idea over what was already publicly available, so the patents were revoked. Additionally, even if the patents were not invalidated, the judge found that Ocado did not infringe them, even if they were valid. Specifically, Ocado’s robots and grid as actually built and used did not fall within the wording of AutoStore’s patent claims. The court concluded that, on proper claim construction, Ocado’s design did not use several key features required by the claims, so there was no infringement in any event. This is all in the judgment. Finally, Autostore had to pay Ocado $256M USD: https://www.therobotreport.com/autostore-to-pay-ocado-256m-in-patent-lawsuit-settlement/ https://www.therobotreport.com/autostore-to-pay-ocado-256m-i...

simgt 10mo ago

Where are you operating? I live in a dense European city and I don't know a single person who orders groceries online. Smallish shops with bike racks in front of the door are simply too convenient, seems hard to beat. Next few days shopping can easily be done in 15mn on the way back home.

istinetz 10mo ago
judging by his name, he is perhaps in Sofia. I am also living here, and can confirm that many middle class people order groceries online.
dottjt 10mo ago
Maybe it's different in Europe, but at least in Australia you end up paying more at smaller shops, so I tend to avoid them. Is this the case in Europe as well?
- londons_explore 10mo ago
  Yes - groceries in a small shop are easily 2x the £/calorie in the UK compared to a big superstore.
  - simgt 10mo ago
    Are you comparing the cost of strictly identical products or something else? I'd be very curious to have some sources if you have any
    - londons_explore 10mo ago
      No - small shops tend to sell mostly expensive branded products in smaller packets, whereas superstores sell larger packs of unbranded products.
      - jnd-cz 10mo ago
        In my country and city the small shops are largely stocked from buying the same things from larger shops combined with their own resupplying network. So you can either walk 100m to the corner shop, pay couple dozen % extra or walk 500m to the nearest Lidl or similar and save on basically the same products.

mikaoj85 10mo ago

> Ocado solves for scaling up, what needs to be solved is actually scaling down. This has been solved by Pio (by AutoStore)

karamanolev 10mo ago
Autostore is great, but it's a small component for a business to be profitable end-to-end. Maybe 20% of the whole thing.

ErroneousBosh 10mo ago

I see Ocado vans driving up to deliver on the Isle of Skye, which I guess must come from either Fort William or Inverness. I can't imagine it's especially profitable to deliver a bag of food in a refrigerated van to somewhere that's nearly four hours driving each way.

rsynnott 10mo ago
I'd guess that they make a loss on this, but that they accept some losses in exchange for being able to say "we cover the whole country!" This is the case for pretty much any delivery business.
- ErroneousBosh 10mo ago
  Meanwhile the AirBnB dwellers continue to not spend a penny locally while taking up valuable housing. They're actually worse than the motorhome brigade.

jon-wood 10mo ago

I think there's a space for something in between Ocado and Uber Eats, in the 2010s I worked for a startup where you could book an Ocado style delivery slot for the next day from a bunch of different butchers, bakers, etc and then we'd send a van round to collect from all of them and deliver it to you. Annoyingly they ran out of money just a little bit too soon, I'm pretty sure if they'd managed to hold out until 2020 they'd have seen a huge increase in sales as everyone fully got on board with online delivery and been laughing. I think the big win with that model vs Ocado is that scaling down is fine, you work with whatever shops are in the area and don't need to deal with building fulfilment centres. Maybe you need a car park somewhere to put the vans overnight. Scaling up is a case of moving into different areas, or onboarding new shops. Absolutely agreed that last mile is a nightmare but we mostly had it down I think, the biggest pain there was that we were relying on a bunch of third parties to pack an order, and if any of them got something wrong we ended up with an unhappy customer on the phone and needing to deal with it.

mikkupikku 10mo ago
VC reinvents the milk man (who used to deliver much more than just milk.)
- RandallBrown 10mo ago
  Our milk man still delivers a lot more than just milk.
no_wizard 10mo ago
>the biggest pain there was that we were relying on a bunch of third parties to pack an order, and if any of them got something wrong we ended up with an unhappy customer on the phone and needing to deal with it. Why not have drivers verify the order with the store? Like have the store folks walk through the pick ups. It might be slower up front, but it would save lots of time and money for everyone in the long run. One of those slow is smooth and smooth is fast situations. Alternatively, the drivers should have a book they could match pics to items perhaps The other thing I wonder if it would be possible, would be to reduce revenue share for stores that routinely had issues with accuracy, but that means you'd need leverage, and you simply may not have it.

Onavo 10mo ago

So who's their target customer? Are we talking about Amazon/Temu scale here?

karamanolev 10mo ago
Seems so, but the economics for groceries don't work like that since you don't ship a slice of meat and a bottle of milk like you ship a 512GB SD card or a smartphone.

PeterStuer 10mo ago

I've done a few projects in (traditional, not pure ecommerce) retail, and in my experience it is a very low margin business. This contrasts sharply with being an innovator in the robotics space, which typically is extremely capital intensive with very long ROI trajectories.

karamanolev 10mo ago
We're proving that automation can happen in that space profitably if done right - carefully, surgically and with a small, focused team. There's Autostore in that space and that system has a massively different economics than Ocado's solution, despite the similarities.
- eurekin 10mo ago
  So, what you're doing? Sounds great!
  - karamanolev 10mo ago
    Right now we're doing two robotic arms and a lot of conveyor belts - some conveyors serve as just transport, others storage of order totes and some others serve a dual purpose (they move the totes but due to the length we let them buffer for a bit). Additionally, a lot of software automation to help people.
    - fredfilz 10mo ago
      Hey @karamanolev, Do you work at Ocado? Ever thought of working in AV? We're a young startup in SF, have a couple customers, just raised our seed, and are now expanding our team with some very critical high-ownership founding engineers. Some info about us: https://crewline.ai/ https://crewline.ai/ https://crewline.ai/blog/crewline-manifesto https://crewline.ai/blog/crewline-manifesto LMK if this is of interest. -Freddie freddie@crewline.ai
- PeterStuer 10mo ago
  Automation in in logistics and warehousing has been happening extensively for decades. However, with margins in large scale grocery retail are often far below 5%, any significant investment in unproven innovation will impact profits in a way that will be extremely noticeable to boards and shareholders. This isnot to say it can not be done, as clearly the other side of the coin is that operational efficiency gains are also much more noticeable on the bottom line than in higher margined businesses, but it is higher risk/reward for low margin sectors. This will favor developing/proving the early TRL stages in new entrant or niche players, then buying out the successes when they hit early maturity.

didntknowyou 10mo ago

love ocado purely for the reason it's cheaper than other services. i suspect they are subsidising each order to build long term customer behaviour but it's a gamble when customers can eadily switch as the moat is purely pricing