The partnership will bring the technology of United Kingdom -based Ocado's Smart Platform, which includes online ordering, automated fulfillment and home delivery capabilities, to the US for the first time.
The deal is part of Kroger's 'Restock' initiative that aims to redefine the food and grocery customer experience in America by improving it tech capabilities and will include Ocado's machine learning fraud detection system.
Ocado is known for fast deliveries and, according to CNN Money, Ocado said it will be helping Kroger with warehouse operations, logistics, delivery route planning and automation.
Kroger's deal with Ocado - coming less than a year after Amazon.com bought key Instacart partner Whole Foods - puts more pressure on the 5-year-old San Francisco company that picks and delivers groceries for dozens of other retailers, including Costco Wholesale Corp, Walmart Inc's Sam's Club, Albertsons and Sprouts Farmers Market Inc.
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"He added: "[It] represents a huge opportunity to redefine the grocery experience of Kroger's customers and create value for the stakeholders of both Kroger and Ocado".
"Ocado's unique, proprietary, and industry-leading technology is set to transform the shopping experience of consumers around the world", said Tim Steiner, CEO of Ocado Group.
Under the partnership, the pair are looking to open three similar sites in the USA this year - with a further 17 in the pipeline.
Kroger says that it is already looking for three locations to build automated delivery warehouses in 2018. Kroger is one of the world's biggest grocery chains with annual sales of $122 billion.
"The scale of the deal could shake up the current USA grocery e-Commerce market, offering a step-change in service levels, order accuracy and timeliness", said Roberts in an email sent to Retail TouchPoints. "Not only does the knowledge make Kroger better positioned to succeed in e-commerce, but Ocado has also illustrated the ability to operate profitably in the e-commerce space, something yet to be realized in the US across any major grocery retailer".