[Report] Even as Temperatures Hit 35°C, the Center Stays at 5°C… Robots Shopping at 4 Meters per Second

Lotte Mart Invests 200 Billion Won in Zeta Smart Center Busan

First Application of Ocado’s Automation Technology and AI-Based Demand Forecasting/Product Allocation

Up to 33,000 Orders Processed Per Day, Targeting 4 Million Households in Yeon

On August 7, when the high temperature in the International Industrial Logistics City of Gangseo-gu, Busan, reached 35°C, stepping inside the 40,000-square-meter (approximately 12,000 pyeong) Lotte Mart Zeta Smart Center Busan was a stark contrast to the muggy outdoor air. The interior temperature of the center was maintained at around 5°C. This is to keep a constant temperature for fresh food products from the moment they enter the center until they are loaded onto delivery vehicles.

Moving further into the center, robots could be seen moving nonstop above the enormous lattice structure. On this 'Hive,' which resembles a checkerboard, the picking robot 'BOT' moves at a speed of 4 meters per second, searching for and transporting ordered products. Inside the hive, products are managed as they are stacked in layers, ranging from a minimum of 8 to a maximum of 21 tiers. Instead of a mezzanine system, the center employs an independent structure by floor, allowing more products to be stored in the same area.

Inside the Zeta Smart Center Busan, an AI robot can be seen. The picking robot, Bot, moves along the top of the hive grid (rail), transporting storage-exclusive baskets to the required locations. The Zeta Smart Center Busan integrates cutting-edge distribution technologies such as up to 1,000 robots, AI, big data, and machine learning. Lotte Mart

When the BOT brings an item, the robotic arm 'OGRP (On Grid Robotic Pick)' picks it up and places it in the order box. The OGRP automatically recognizes the location where the product needs to be picked and uses sensors to adjust its grip strength, reducing the likelihood of the item becoming squashed or damaged. For products that are too large or heavy for the robots to handle, workers process these at the picking station. Both humans and robots share roles in fulfilling customer orders.

Artificial intelligence (AI) also determines the optimal storage location for each product. By analyzing factors such as season, weather, and order volume, items expected to have higher demand are placed where they are easier to retrieve. All processes from storage to packaging, shipment, and delivery routing are integrated within a single system. An end-to-end cold chain has also been established to maintain low temperatures from inside the center all the way to the delivery vehicles.

Cha Woochul, CEO of Lotte Mart and Super, emphasized, "Conventional logistics centers are exposed to the external environment, so during heat waves like now, it can actually be even hotter inside the center, which can undermine the quality of fresh food. Zeta Smart Center is a system that enables customers to receive fresh foods in perfect condition and on time."

Zeta Smart Center Busan moving belt. Delivery totes move along the belt to the packing and shipping area. Lotte Mart

Lotte Moves to Solve Chronic Issues of Online Grocery Shopping... The Reason for Partnership with Ocado

Lotte Mart has invested about 200 billion won in the Zeta Smart Center Busan. The driving force behind this large-scale investment decision was the company’s belief in the significant growth potential of the online food market.

According to Statistics Korea, the value of domestic online grocery transactions rose from about 17.17 trillion won in 2019 to about 52.3 trillion won last year, a more than threefold increase. The compound annual growth rate (CAGR) is 20.4%. For agricultural, livestock, and fisheries products transacted online, the average annual growth rate during the same period was 25.5%. However, the online penetration rate of food products (the ratio of online transactions to total retail sales) is only 28%, which is lower than for fashion (33%), cosmetics (41%), furniture (50%), and home appliances (55%). Maintaining freshness, incorrect deliveries, and delivery delays are cited as the main limitations.

On the 7th, Cha Woochul, CEO of Lotte Mart and Super, is speaking at 'Zeta Smart Center Busan' located in the International Industrial Logistics City, Gangseo-gu, Busan. Photo by Han Yeju

Jaewoo Jung, Head of Lotte Mart Online Business Division, stated, "Customers commonly experience situations such as 'the lettuce is wilted' or 'the watermelon isn’t sweet.' While online grocery shopping may seem simple, it is challenging to guarantee the quality of fresh foods, minimize missing items, and deliver at the customer’s desired time."

Lotte Mart saw limitations in solving these issues with only its own technology, so in November 2022, it partnered with British retail technology company Ocado. Ocado runs the 'Ocado Smart Platform (OSP),' which integrates the entire online grocery distribution process from demand forecasting to storage, picking, packing, and delivery. The company collaborates with 14 retailers across 11 countries, including Kroger in the United States and AEON in Japan. This is the first time the OSP has been implemented in Korea.

Exterior view of Zeta Smart Center Busan. Lotte Mart operates the state-of-the-art AI logistics center 'Zeta Smart Center Busan' located in Mieum-dong, Gangseo-gu, Busan. It delivers products at customers' desired times such as dawn, daytime, and nighttime to 4 million households in Busan and the Yeongnam region. Lotte Mart

4,000 Frozen Food Items, Targeting 4 Million Households in Yeongnam

The Zeta Smart Center can handle up to 35,000 SKUs, with about 10,000 of these being chilled or frozen items. Of these, up to 4,000 are frozen products, which is more than double the roughly 1,700 frozen items typically handled by major supermarkets. Lotte Mart also plans to expand its product lineup to include up to 10,000 exclusive items, such as its own private brands (PB) 'Oneuljoheun' and 'Yorihada,' and directly sourced overseas goods.

The automated systems will be scaled up in stages as orders increase. The company plans to add 38 more BOTs currently being shipped from the UK, bringing the total to 400 by the end of this year. If the volume of daily orders reaches its maximum of 33,000, the number of BOTs will be increased to up to 1,000. Jung explained, "BOTs are now arriving in Busan one after another. We will expand automation facilities in step with the growth in order volume."

The delivery process is also differentiated from existing supermarket online orders. Customers can choose their preferred delivery window in 2–3 hour increments from early morning to evening, with up to 13 delivery time slots per day. Busan, Changwon, and Gimhae are served directly from the center, and next year the company plans to expand the service area to Daegu and Ulsan using 'spoke' locations as delivery bases. Ultimately, the aim is to serve 4 million households in Busan and the Yeongnam region.

Waiting view of Zeta Smart Center delivery trucks in Busan. Zeta Smart Center's delivery uses 1-ton electric delivery trucks in collaboration with Hyundai Motor Company for daytime deliveries. Zeta Smart Center Busan introduces a differentiated delivery system to provide on-time delivery even in environments with many apartments and heavy traffic congestion. Lotte Mart

Initial Orders Up 30%... "Goal to Achieve BEP in Year Six"

The center is already seeing an increase in the number of initial orders. Since July 14, Lotte Mart has gradually transferred online orders previously fulfilled by its stores to the Zeta Smart Center. After taking over deliveries for 13 stores in the Busan area and launching early morning delivery, the number of orders increased by 30% compared to the previous month.

Jung highlighted, "So far, we haven’t even seriously begun marketing or promotional campaigns. The fact that orders have increased just by shifting fulfillment from stores to the center is an encouraging sign."

On the 7th, Jaewoo Jung, head of Lotte Mart Online Business Division, is speaking at the 'Zeta Smart Center Busan' located in the International Industrial Logistics City, Gangseo-gu, Busan. Photo by Han Yeju

The key will be operation rate and profitability. The maximum daily order processing capacity at Zeta Smart Center Busan is 33,000 orders. If operated 365 days a year, Lotte Mart estimates the annual transaction volume could reach around 960 billion won. However, the company does not intend to reach 33,000 orders per day immediately, instead outlining a five-year plan to increase the operation rate of the center.

Jung said, "It’s not easy for online businesses to achieve profitability. It's not a business model like Coupang, which can carry expected losses for 10 years." He continued, "Our target is to reach 33,000 orders within five years. In the fifth year, we aim to secure profitability based on EBITDA (Earnings Before Interest, Tax, Depreciation and Amortization), and by the sixth year we expect to achieve an actual break-even point (BEP)."

This content was produced with the assistance of AI translation services.