German grocer Rewe takes aim at Amazon with cutting-edge facility

Zurich

IN AN industrial park outside Cologne, German grocer Rewe Group is fighting back against Amazon.com Inc with what it describes as the most technologically sophisticated online shopping facility in Europe.

The closely held retailer's building, the size of two-and-a-half soccer fields, holds 20,000 items from drinks to diapers, twice as many as a typical supermarket. Products are stored in half a dozen distinct cooling zones. Orders are assembled with the help of a towering labyrinth of carriages, elevators and conveyors synchronised by the company's algorithms, before they are loaded on trucks and shipped out across a roughly 1,000-square-mile region from the Dutch border to Dusseldorf.

All that tech - which contrasts with Amazon's largely human-operated grocery warehouses - is needed because of the country's strict laws on handling fresh food. For example, ground meat must be stored at no more than two degrees Celsius, apples and grapes at no more than seven degrees, and bananas and avocados at no more than 14 degrees.

The complexity of those rules is one reason why online grocery sales have yet to take off in Germany. Now Rewe sees an opportunity to beat Amazon and other online retailers, like the UK's Ocado Group Plc, at their own game.

"We need six different cooling zones, while Ocado in England can make do with three, making the complexity of our supply chain brutal," said Wolf-Axel Schultz, who runs the project. "Brutal, but fascinating."

Rewe takes a high-tech approach at its Cologne site. Its system automatically handles fresh produce and cold cuts sold by weight, rather than requiring human intervention.

The 80 million-euro (S$124.5 million) facility "plays Tetris" when getting goods into place for delivery, making sure everything fits while complying with the food-handling rules, said Andreas Palmen, who oversees the site.

Boxed goods are automatically sent from high storage racks via roller conveyors designed by Austria's Knapp AG. The receiving, picking, packing and shipping areas all need to have the same temperature zones as the storage sections, complicating the task of assembling a typical 50- to 150-euro order.

The conveyors send items past scanners that eliminate any goods close to their best-before date, and finally to human "pickers" who fill bags and boxes for loading onto trucks.

In a traditional warehouse, the pickers go all the way to the shelves to fetch goods, walking miles back and forth.

The site is designed to handle 120 million euros in annual revenue, Rewe chief executive officer Lionel Souque said at an event for the warehouse's opening.

"We cannot say when we will earn money with this," Mr Souque said. "It is an investment into the future." BLOOMBERG