Woolworths buys online shopping assets from failed tech play

The arms race between retailers is so heated Woolworths has taken the unusual step of buying online shopping assets and IP from a failed grocery play.

Woolworths has acted to protect its access to key online shopping delivery technology and intellectual property. Picture: Dallas Kilponen

Woolworths has taken the unusual step of buying the assets of a failed US venture tech company to secure ongoing access to crucial technology.

It comes as Woolworths, Coles, and a range of online retailers fight for the minds of customers, with the ability to order, pick, pack and deliver goods as quickly and efficiently a key pillar of the online shopping “arms race” now at hand.

Woolworths has now acted to secure some of its advantage when it comes to operating micro-fulfilment centres next to its supermarkets. It has paid around $3.85m for some of the tech and intellectual property assets of collapsed tech company Takeoff Technologies from its chapter 11 bankruptcy in the US, having been a customer of the company’s fulfilment software and then lending it money to continue as a going concern as its bankruptcy played out.

Despite Takeoff Technologies selling its software and fulfilment systems to a number of larger international supermarkets such as Albertsons, Carrefour and Loblaws, it was Woolworths which ultimately bought the key assets.

The deal to buy some of the assets and intellectual property from the Takeoff Technologies was launched under the leadership of former Woolworths chief executive Brad Banducci, who also launched the supply deal with Takeoff almost five years ago and at the time described the technology as a “game changer” which would help Woolworths succeed amid the online shopping boom.

“To ensure business continuity for Woolworths stores utilising the Takeoff software, we purchased some assets of Takeoff Technologies in August, this included the software and some other intellectual property,” a Woolworths spokesman said on Monday.

“We use Takeoff at three sites in New Zealand, two sites in Australia, with a third in development. All e-stores are operating as normal and micro-fulfilment and customer fulfilment centres are part of our strategy to service growing demand for e-commerce services.”

The initial deal in 2020 between a then-thriving Takeoff Technology and Woolworths was heralded by Mr Banducci which would bolster Woolworths’ credentials and abilities as an online retailer.

Woolworths fulfilment centres run on the software created by Takeoff, using robots and vertical shelves to shift groceries through an automated process.

Takeoff Technologies software soon became highly sought after by other global supermarket chains across the US and Europe, and the Boston-based grocery tech company became profitable as its blue-chip customer base grew.

However, the start-up soon experienced growing pains, expanding too quickly and ultimately suffering as the online shopping boom started to dim after Covid-19 lockdowns, with the company collapsing into chapter 11 bankruptcy.

Advised by US law firm Jones Day, which has a growing presence in the Australian market, Woolworths was one of three lenders to Takeoff Technologies and provided debtor-in-possession financing to the failed business.

For Woolworths, this ensured continued operation of Takeoff software through its chapter 11 case. Following a sale process, Woolworths was the successful bidder for the Takeoff assets.

The micro-fulfilment centres are efficient and cost effective for retailers such as Woolworths, with the software enabling an order to be picked and dispatched within minutes, compared to as much as half an hour for online orders done manually.

“What we are trying to do is reinvent the store of the future, and the store of the future should be able to provide a great in-store shopping experience plus also meet customer needs for pick-up or home delivery,’’ Mr Banducci told The Australian in 2020 as he opened Woolworths’ first e-commerce floor and micro-fulfilment centre located at the back of its existing Carrum Downs supermarket in Melbourne.