American retail giant Kroger has announced its decision to shutter three out of the eight automated warehouses it constructed in partnership with the UK's Ocado. In a strategic pivot, Kroger is set to deepen its collaborations with on-demand delivery platforms like Instacart and DoorDash. This realignment comes as some of the Ocado-operated warehouses have fallen short of financial projections.

By embracing a more adaptable third-party delivery framework, Kroger aims to slash costs and boost operational efficiency. The retailer projects that this shift could inject an additional $400 million in profits into its e-commerce operations by 2026. This development underscores the intensifying competitive landscape for Ocado, as its model—which hinges on substantial capital outlays coupled with decentralized customer delivery—is struggling to turn a profit in areas with lower population densities.

Despite retaining five warehouses and actively pursuing tech partnerships, Ocado faces the looming expiration of its exclusive deal with Kroger. This could potentially complicate its ambitions for further expansion across the US market.