Ocado, the online grocery and technology company, is cutting 500 jobs in its technology and finance divisions as part of an AI-driven strategy to reduce costs. The company, which employs 20,000 people, says artificial intelligence has boosted engineering productivity, allowing for a smaller workforce.
AI Adoption Reduces Engineering and R&D Costs
Ocado’s latest job cuts follow a reduction of 1,000 employees in the last financial year. The company, which co-owns its British grocery delivery service with Marks & Spencer, specializes in robotic picking and delivery solutions for global retailers. CEO Tim Steiner emphasized that the cuts, though difficult, are necessary to meet cash flow targets.
“We are leveraging AI to enhance the productivity of our engineering teams while reducing our research and development expenses,” Steiner explained.
Robotic Warehouses Reduce Need for New Hires
Ocado continues to expand its robot-led technologies for major clients, including Kroger in the US and Casino in France. The company reports that AI-driven automation is improving warehouse efficiency, reducing the need for additional staff as sales grow.
At Ocado’s advanced warehouse in Luton, over a third of individual products are already picked by robots, and the company expects robotic picking to cover 70% of product types in the near future.
Ocado’s Stock Drops as Technology Sales Growth Slows
Despite sales rising 14% to £3.1 billion, Ocado reported a pre-tax loss of £374.5 million for the year ending December 1. The company’s stock plunged by 17% after revealing that technology sales growth is expected to slow to 10% this year, down from 18% last year. Delays in launching two new Kroger warehouses in the US contributed to this decline.
The company also wrote off a final payment from M&S for its retail business stake sale, wiping out the remaining £29.1 million of an originally expected £190 million. While negotiations continue, M&S has refused to pay the fee, arguing that performance targets were not met.
Grocery Sector Faces Widespread Job Cuts
Ocado’s layoffs come amid a wave of job cuts in the grocery sector. Aldi is consulting on a head office restructuring that may result in 350 job losses, while Sainsbury’s recently announced 3,000 job cuts following the closure of hot food counters and in-store cafes. Tesco is also reducing its workforce by 400 employees.
The move highlights a growing trend in the industry, where companies are increasingly turning to AI and automation to streamline operations and cut costs.
