Lotte Shopping joins hands with UK's Ocado to build online grocery store 

Lotte Shopping Co. will join forces with the Hertfordshire, England-based Ocado Group, which licenses grocery fulfillment technology to retailers. 

The South Korean retailer plans to employ the retail tech company's whole gamut of services– from placing orders to fulfillment and delivery. 

All eyes are on whether the leap of faith in the new technology will give Lotte the boost it needs to recapture the No.1 spot in the fresh produce sector. 

Ocado Group owns a 50% share of Ocado.com and licenses its grocery fulfillment technology to global retailers, namely Kroger in the United States and Coles Group in Australia. 

COMPREHENSIVE PLATFORM

The online grocery market designed by Lotte and Ocado will be available as early as 2025. 

“The distribution headquarters is coming up with an overarching plan as it oversees the department stores, grocery stores and the online platforms,” a Lotte employee explained. “The plan is to create a completely new online platform specialized for buying groceries.” 

The Lotte app will also be upgraded with a heavy focus on online grocery shopping. 

The existing website LotteOn will collaborate with the Lotte Department Store to add luxurious flair. 

“We will build a combined sourcing system for grocery stores, convenience stores and more, which makes Lotte the first grocery platform that will combine off- and online shopping,” a Lotte employee claimed.

Shinsegae Inc.’s online platform SSG.com has a mixed offering of luxury products and groceries.

Kurly Inc., the operator of same-day grocery delivery platform Market Kurly, is widely thought to lack sourcing power when compared to the conglomerates. 

An e-commerce expert said the fresh produce sector in South Korea has a mere 25% penetration rate in online platforms, adding that even Coupang Inc. has a long way to go when it comes to fresh produce. 

LOCALIZATION

Lotte was a pioneer in online retail, opening an online department store back in 1996, although it has failed to lead the e-commerce market in recent years. 

The CEO of Lotte Corp. Shin Dong-bin is hoping its collaboration with Ocado will serve as a turning point. 

Ocado is widely thought of as the only retail tech company that can realize the trifecta of fresh produce delivery – arriving on time, in full and in fresh condition. 

The Ocado.com website has a 13% share of the United Kingdom’s grocery store market without any brick-and-mortar stores. 

The group is famous for some 1,000 robots moving 4 meters per second at the automated Ocado Customer Fulfilment Centre (CFC). 

In addition to Kroger and Coles Group, Sobeys in Canada, Japan’s AEON, Casino in France and more are using the Ocado system. 

Kim Sang-hyun, the head of the retail department at Lotte Group, and Lotte Mart CEO Kang Sung-hyun visited the Ocado Group headquarters in June. 

Lotte explained that the reason why it chose to work with Ocado is that the latter invests some $300 million in research and development (R&D) each year and that Ocado Retail is also enjoying a steady rise in its number of customers. 

Experts say the success of the new alliance depends on how well the two companies can localize Ocado's solutions for the South Korean market. 

For example, Ocado hires its own set of drivers for delivery as opposed to relying on third-party agents, just like Coupang. 

“We will build a system optimized for South Korea, taking a variety of factors such as the population density and different grocery shopping patterns from England into consideration,” a Lotte employee said. 

Write to Dong-Hui Park at donghuip@hankyung.com
Jee Abbey Lee edited this article.