Ocado Retail, the joint venture with Marks and Spencers, is to close its Hatfield customer fulfilment centre (CFC), putting 2,300 jobs at risk.
Announcing the closure today (25 April), Ocado said it has commenced consultation with its 2,300 staff at the Hatfield CFC.
The consultation is expected to close this summer, with Hatfield operations planned to halt in line with the start of operations at the Luton site.
The company added that it "expects to retain a large proportion" of the workforce, either in its new Luton CFC or across its wider UK network.
The Hatfield centre is Ocado's oldest CFC and fulfills aound a fifth of Ocado.com's 400,000 weekly orders. These orders will be moved to other "high-productivity, next-generation" facilities, including the nearby Luton CFC, scheduled to open later this year, the company said.
Ocado said today that the move is part of its strategy to take advantage of the continued channel shift to online, adding that it did not expect the closure of Hatfield CFC to result in any change to the volume of orders Ocado fulfills.
However Ocado has seen sales drag since the end of the Covid-19 pandemic lockdowns, when orders rocketed as consumers abandoned high street shopping.
Last month, Ocado announced that new distribution centres planned for the south-east and north-west of England had been put on hold, revealing it had built capacity to process 700,000 orders a week in the UK but was delivering less than 400,000.
It attributed the current level of orders to a return to high street shopping following the pandemic and the impact of the cost of living crisis, with customers reducing their orders and using more discount vouchers.
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Ocado said the Hatfield CFC had been the "core test bed" for the Ocado operating model but had fallen behind other CFCs on technological innovations, which has allowed "huge leaps forward" in productivity and service levels.
The retailer added: "The latest generation of robotic CFCs are consistently achieving well over 200 units picked per labour hour ('UPH') within the facility compared to UPH of around 150 for our first generation CFC in Hatfield."
It added that the newer sites also have much lower energy usage and that, under its modernisation strategy, dubbed Ocado Re:Imagined, the company expects further improvements in UPH and customer experience, including increased capacity for same day deliveries.
Tim Steiner, Ocado Group chief executive and chairman of Ocado Retail, said: "As the online grocery channel grows, our new, enhanced fulfilment centres and technologies will drive a step change in customer experience and efficiency.
"With this capacity coming online, now is the right time for us to halt operations at our oldest facility at Hatfield and consider our future options for the site.
"Ocado.com customers will continue to enjoy the same outstanding standard of service throughout the region, which will further improve as the benefits of our new technologies are deployed across the network.
Turning to the impact on Ocado's Hatfield employees, he added: "We have many brilliant Hatfield-based colleagues who have been with us for a long time and are a big part of our journey.
"We want to keep as much of this talent and experience within the business as possible and expect to retain a large proportion of colleagues impacted by these changes, either in our new Luton CFC or across our wider UK network.
"We will be doing everything we can to support those affected through the consultation."