Ocado Group's online retail partnership with Marks & Spencer is set to close its original automated warehouse in Hatfield, England, putting 2,300 jobs in jeopardy.

The Hatfield warehouse, which is the oldest in Ocado Retail's network and currently fulfills approximately 20% of weekly grocery orders, lacks the advanced technology found in newer facilities, according to Bloomberg. 

With a picking rate of about 150 items per hour, compared to over 200 items at more modern sites, the company has announced plans to close the Hatfield warehouse.

Ocado has stated that orders originally handled by the Hatfield warehouse will be redirected to its other highly automated facilities across the UK, including its nearby location in Luton, England. The company has also expressed intentions to offer job opportunities to affected workers at Luton and other sites.

Ocado Retail faced challenges in capitalising on the surge in online shopping during the pandemic due to limited warehouse capacity for order fulfillment. While efforts have been made to increase capacity since then, the ongoing cost-of-living crisis has resulted in the loss of customers to more affordable competitors.

“Ocado’s decision to close its oldest customer fulfillment center (CFC) goes some way to addressing the overcapacity that the rapid buildout of CFCs has created as shoppers prefer purchasing smaller amounts more frequently in supermarkets,” said Charles Allen, retail industry analyst at Bloomberg Intelligence.

Ocado Retail is actively addressing its price perception and has initiated a price matching strategy with Tesco Plc, aiming to attract more shoppers. As a result, Ocado's shares rose by 3% at 12:30 pm in London.