U.S. retailer Kroger has decided to close three of its eight automated customer fulfillment centers built in partnership with Ocado.
Kroger plans to deepen its ties with quick-commerce players or rapid delivery platforms such as Instacart and DoorDash, which offer faster delivery times and leverage existing store networks to cut operational costs.
Kroger, which reported sales of $33.9 billion in the second quarter of 2025, said the three automated sites did not meet financial expectations. The shift reflects a broader market trend in which customers demand same-day delivery, often within just a couple of hours, prompting retailers to prioritize speed, convenience and flexibility. Kroger offers delivery in under two hours from 97 percent of its stores.
The biggest challenge for Ocado is that some of its U.S. automated sites are located in regions where Kroger has limited store presence, making it difficult to build scale. While some centers in markets like Ohio have performed well, others struggled to gain traction.
Ocado’s fortunes contrast sharply with the rise of Instacart and DoorDash. Instacart shares climbed after strong third-quarter results, while DoorDash shares continue to grow this year. Meanwhile, Ocado’s share price has fallen dramatically since its pandemic-era peak, losing about ninety percent of its value since 2021 and declining more than a third this year, Reuters news report said.
Kroger expects to boost store openings by 30 percent in 2026 to drive faster growth in both in-store and online sales. Alongside expanding its physical footprint, the company is accelerating modernization efforts, with artificial intelligence playing a central role. Kroger says its AI deployments are already delivering results such as more competitive pricing, reduced shrink and faster order fulfillment, including two-hour pickup.
The company is also advancing its strategic review of eCommerce to strengthen customer experience and profitability. Kroger plans to use its stores as key fulfillment hubs to speed up delivery, cut last-mile costs and expand rapid delivery services without heavy capital investment. As part of improving efficiency, Kroger is assessing every site in its automated fulfillment network. Locations in high-density markets are performing well, while those with lower demand are facing challenges. The company is evaluating all options to improve profitability while maintaining strong customer service.
Retailers in Britain, including Tesco and Sainsbury’s, have favored store-pick e-commerce models that allow rapid deliveries without heavy automation investments. Analysts expect more automation in the future, but retailers are working to strike a balance between delivery speed and the cost efficiencies of robotics.
Ocado’s earlier ambition to develop twenty automated sites with Kroger helped fuel its rapid rise during the pandemic. However, Kroger’s recent pullback raises questions about Ocado’s ability to secure additional large-scale partnerships. The company remains active globally, working with Aeon in Japan, Lotte Shopping in South Korea and Coles in Australia. Its joint venture with Marks & Spencer continues to perform strongly and remains Britain’s fastest-growing online food retailer.
Analysts say Ocado’s capital-intensive model works best in dense urban markets with high order volumes, such as London, Manhattan and Paris. While Kroger intends to retain five Ocado-operated warehouses, market watchers believe future U.S. expansions may be harder to secure.
Some analysts note that Ocado’s exclusivity agreements with partners are beginning to expire, creating an opportunity to attract new clients. However, the setback with Kroger may weigh on its prospects for additional U.S. deals.
Kroger is expected to continue using Ocado for store-based automation and potentially for integrating services across Instacart, DoorDash and Uber Eats. Yet industry experts say the U.S. market will be more challenging for Ocado as rapid delivery firms accelerate their growth and retailers pursue flexible, store-centered models.
Rajani Baburajan
