Japan's Aeon turns to Ocado to expand online grocery service

TOKYO, Nov 29 (Reuters) - Japan’s biggest supermarket operator, Aeon Co Ltd, hired British online grocer Ocado Group on Thursday to expand in e-commerce, hoping to fend off rivals such as Amazon, as more customers buy groceries online.

Online grocery shopping has yet to take off in Japan, where consumers are accustomed to shopping daily for fresh foods such as fish. But growing numbers of working women and improved technology and logistics networks are expected to change that.

Aeon’s rival Seiyu, operated by Walmart Inc, launched an online grocery venture with e-commerce firm Rakuten Inc in 2018, aiming to compete with the likes of Amazon Fresh.

Aeon, which operates more than 21,000 stores, said it would use Ocado’s software and expertise to build a new online business with a national fulfilment network capable of handling 600 billion yen ($5.52 billion) in sales by 2030, and 1 trillion yen by 2035.

Aeon did not say how much it was paying Ocado, but said the agreement included an upfront fee, in addition to later payments, which will depend on performance.

Ocado said it expected an additional 25 million pounds ($32.08 million) of operating costs in fiscal 2020 to implement the service.

While Ocado’s retail business holds only a 1.4% share of Britain’s grocery market, its technology has powered the group’s 8.1 billion pound stock market valuation, enabling it to win partnership deals with supermarket groups around the world, including Kroger.

Ocado and Marks & Spencer this year agreed to a 1.5-billion-pound joint venture, creating Ocado Retail and signalling the end of Ocado’s supply contract with upmarket supermarket chain Waitrose in September 2020. ($1=108.6400 yen) ($1=0.7794 pounds) (Reporting by Ritsuko Ando; Editing by Clarence Fernandez)