Will Asda-Ocado tie-up live up to market expectations?

Few would have had a tie-up between Asda and Ocado on their 2026 bingo card.

Under a new long-term partnership announced last week, Asda will adopt Ocado’s Smart Platform technology across its entire online operation. Starting in 2027, Asda’s website and e-commerce platform will receive a significant upgrade. Ocado’s tech will also power the in-store picking and last-mile delivery of Asda’s 700,000 orders a week.

The announcement might have come as a surprise, but Ocado shares jumped 12% on last Friday’s news – before falling back to previous levels.

So what does the partnership mean for Asda and Ocado? And will it work?

Strategically important

For Asda it represents a significant investment, albeit the fee-based structure means upfront investment will be minimised .

While the state of its stores receives the bulk of focus, fixing its online offer is “strategically important” for Asda’s long-term results, says Eleanor Simpson-Gould, senior retail analyst at GlobalData. Asda’s online sales are still approximately £3bn annually, but this has slipped sharply throughout 2024 and 2025 amid its broader decline.

“It has struggled to provide the reliability, pricing and quality that drives customer loyalty,” says Simpson-Gould.

That was reflected in a decline from 17% to 13% in the number of shoppers who rated Asda the best online shop last year [NIQ Homescan April Survey 2025]. And its poor performance in the Online Grocer 33, which it has failed to win since October 2024, backs this up. For substitutions, a pet peeve of online shoppers, swaps appeared in a quarter of all online orders – second only to Sainsbury’s according to Which? data.

Online performance has been hampered further by the disastrous final stage of Asda’s £1bn Project Future upgrade in August, with Allan Leighton admitting it was suffering delivery delays and web interface issues well into 2026.

Ocado’s Smart Platform should dramatically improve search capabilities and allow for better product recommendations and an improved checkout experience.

Under the second phase of the rollout, Ocado will also run Asda’s in-store picking and last-mile delivery systems, unlocking benefits from more efficient routing of vans, less waste and improved timeliness of deliveries.

“From a customer point of view, they should expect more delivery slots and better picking accuracy,” says technology consultant Andrew Busby, of Redline Retail. “If it’s executed well then they should be in a better place.” Crucially, without significant infrastructure investment .

While at present the partnership only extends to Ocado’s online and in-store technology, Ocado CEO Tim Steiner has hinted that it could expand to see Asda roll out Ocado’s automated warehousing tech across its supply chain.

This would bring further benefits and be in keeping with Asda’s recent history, which has seen it outsource elements of its George and GM supply chain.

However, emphasis should be put on the long-term nature of the partnership, Busby adds. Asda will not see these benefits until well into next year. In the short term, it’s still bleeding sales and customers to its rivals.

“Ocado is no panacea,” says Shore Capital Partners’ Clive Black. The integration will have to come alongside continued investment into improving its stores in a way that brings a meaningful increase in shoppers through the doors.

Asda chief customer officer Rachel Eyre has promised a much-improved shopping experience and offer through its Take a Fresh Look campaign, which launched earlier this month. This includes redeploying some existing store colleagues as dedicated greengrocer colleagues.

If Ocado goes live without the adequate investment into people and hours in store needed to support it, Asda risks putting “lipstick on the pig”, Busby says. “You can throw whatever technology you like at something, but measurable improvement doesn’t always follow.”

Lessons from Asda’s recent history and the £1bn it spent on its Project Future rollout serve as a warning of just how crucial getting it right will be.

Vindication for Ocado

In the case of Ocado, the announcement of the deal comes at just the right time following a punishing few months. In January, Canadian supermarket Sobeys announced it was to close its Ocado-powered CFC in Calgary. And in November, Kroger confirmed it would shutter three of its Ocado tech-powered CFCs, as it prioritised a store-pick model.

In response, Ocado has been pushing its ‘Store Based Automation’ solution, and other software, which allows retailers to offer faster, more accurate grocery deliveries, without the huge capex of a multi-year distribution centre build.

Asda will benefit from “Ocado’s significantly evolved platform, giving them the flexibility to adapt as the market continues to develop”, Steiner said last week. But Ocado will benefit too, Asda providing it with a major case study, proving it is more than just an expensive robotic warehouse provider.

“There’s upside for Ocado if this solution provides the promised productivity increases versus manual picking, as more supermarkets could consider this option,” says Charles Allen, senior retail analyst at Bloomberg Intelligence.

“Asda is a good model for this experiment – with its large stores, relatively narrow range of branded items and high-teens online participation – which will deploy less capital than out-of-favour warehouses,” he adds.

Ocado will, of course, be hoping Asda goes further into its technology stacks as some others have. “Bon Preu is a great example of how Ocado can scale the depth of relationship with its clients,” says Peel Hunt analyst James Lockyer.

The Catalan supermarket chain rolled out similar software-based Ocado solutions for in-store fulfilment in 2018, extended it to home delivery in 2019, and last year announced it was to launch a new Ocado-powered CFC – giving Bon Preu an “enhanced customer proposition and a significantly lower cost-to-serve”, Ocado said.

“Upgrading front-end software to OSP should deliver efficiency benefits quickly and make it easier to implement hardware solutions later,” Lockyer adds.

Meanwhile, while no financial terms have been disclosed, the deal still represents a welcome cash injection for Ocado.

Based on arrangements such as Ocado’s Bon Preu deal, Bank of America estimates fees in the range of 0.7% to 1.0% of sales. Given Asda’s online sales of £3bn annually [Kantar Worldpanel], that equates to annual revenues of £21m-£30m once the rollout is complete in 2028.

“The contract should be highly profitable, with limited associated costs and the majority of revenues falling through to EBITDA,” says Bank of America equity research analyst Xavier Le Mene. “Capital intensity is also expected to be low, as the agreement is software-only.”

Black is less convinced. For Ocado, “it is clearly welcome news, but does not move the dial on an empirically proven failed business model from an economic returns’ perspective, sad to say”.