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Woolworths automation plans can’t stop share price sinking lower

A new partnership between United States (US)-based groceries startup Takeoff Technologies and Woolworths Ltd (ASX: WOW) hasn’t been enough to stop the Woolworths share price sliding 2.4% lower in today’s trade.

The S&P/ASX 200 (INDEXASX: XJO) index has endured its worst day in over a year following escalations in the US–China trade war, but it’s this new strategic partnership that has caught my eye this afternoon.

What’s the latest on the new Woolworths’ strategic partnership?

According to an article in the Australian Financial Review (AFR), Woolworths has signed an exclusive partnership with Takeoff Technologies to build automated micro fulfilment centres in supermarkets or liquor stores to increase efficiency of online deliveries.

The article said Takeoff Technologies will build an initial three micro fulfilment centres to receive, process and file online orders for the Aussie retailer.

The move comes after rival supermarket giant Coles Group Ltd (ASX: COL) signed a long-term deal with UK-based online grocer Ocado to build two automated centres in Melbourne and Sydney back in March.

The AFR article said the Coles fulfilment centre will each have about 1,000 robots moving orders around and are expected to start operating in four years time, with the ability to handle $500 million to $750 million worth of goods per year.

It looks as if Woolworths is playing catch-up with its grocery rival, as cut-throat competition from the likes of Aldi and Kaufland have compressed margins and increased the need to improve operational efficiency.

How has the Woolworths share price reacted?

The Woolworths share price has fallen 2.2% to $34.80 at the time of writing, while the Coles share price has fared slightly better, falling 1.74% to $13.59.

As two big-name companies in the Aussie retail space, I’d expect to see the Coles and Woolworths results release be used as a barometer for the health of Aussie retail spending and the broader economy.

Both of these companies have seen their share prices climb higher in 2019 amid the ASX 200 index rebound, but I’d be waiting until after the August results season to see how the competitive environment and ongoing price war have done to affect their respective bottom lines.

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Motley Fool contributor Kenneth Hall has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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