IRUK 500

Ocado: six key ways the online grocer is developing its business

Today’s Ocado full-year results have much to say about the direction of the online grocer’s strategy, and about the future of online grocery itself. Here are the five key themes we noted, as the retailer reported revenues of £1.3bn in the year to November 27. They were 14.8% up on the same time last year, and pre-tax profits of £12.1m, 1.3% up on last time. Pre-tax profits before exceptional items, which delivered a net £2.4m credit, came in at £14.5m, 21.8% up on last time.

The customer
Ocado [IRDX ROCA], a Top100 retailer in IRUK Top500 research, saw customer numbers rise by almost 14% in the full year, while orders were up by nearly 18%. Tim Steiner, Ocado chief executive, says that in a “challenging retail environment” this is “testament to the strength of our customer proposition, market position and technology”. However, average basket sizes fell by 2.7% to £108.10; this, said Ocado, came mainly as prices fell across the grocery industry, but also as Smart Pass customers shopped more often and for smaller orders.

The retailer says in today’s full-year results that “providing a compelling proposition to consumers is critical to attracting new customers to Ocado, and to encourage loyalty and retention for future shops.” With that in mind it maintains a constant focus on “a consistently positive user experience”. “We always strive to improve the customer experience through enhancements to the speed, convenience and ease of using our service,” it says. “This provides our customers with the freedom and flexibility to navigate easily and complete their weekly shop wherever and whenever they please.”

Bridging the gap between the store and online
During the last year the retailer broadened its service to Morrisons.com, enabling click and collect services through the development of a store-picking module.

It also opened its first shop, Fabled, in partnership with Marie Claire. Fabled is the flagship, Tottenham Court Road, store for an online shop of the same name. Today Ocado said Fabled’s early performance was “encouraging” and that it would continue to develop it and other destination sites. “We anticipate Fabled, benefitting from the strong brand association of our partner, Marie Claire, will develop into an attractive destination retail brand for premium beauty products,” it said.

Ocado cites both developments, at Morrisons.com and Fabled, as examples of how future third-party customers of the Ocado Smart Platform will benefit from constant improvements to its technology.

Fulfillment
Ocado now offers delivery slots as early as 5.30am. It trades on a reputation for punctuality that it describes as market-leading, and says 99% of deliveries were accurate while 94.9% were on time or early. Both KPIs it says, are “critical elements in providing a high quaity, reliable and consistent service for our customers”.

Half of its regular sales are now with Smart Pass customers, which offer free deliveries to subscribers.

Mobile
More than 55% of all Ocado orders were checked out using apps and mobile sites. “Given the importance of mobile, and the constant development and improvement of underlying mobile device technologies, it is critical we continually improve our capabilities to enable easy-to-use shopping,” said Ocado in its full-year statement.

The importance of innovation
Steiner emphasised the value of innovation at a time of great change. “In this ever evolving retail market, we look forward to further developing our capabilities through innovation, creating the next generation ecommerce capabilities that will ensure our offer remains compelling for both retail and OSP (Ocado Smart Platform) customers alike,” he said.

The retailer says innovation is a focus as it looks to stay ahead of the competition. That includes using personalisation in ways such as offering gifts and online coupons that are deemed of interest to individual customers, based on their shopping history.

How the grocery market has developed
Ocado drew a picture of a market of intense competition as more shoppers change the way they buy, shopping both at discount and convenience stores and online, that has driven prices down. Now that labour costs are rising and sterling has weakened, it sees great pressure on profits and “uncertainty across the industry”.

“Our continued focus on improving our proposition to customers and driving the efficiency of our business through technology helps to protect us in these conditions,” said Ocado in its full-year statement.

Mentioned in this piece…

Ocado

Ocado

IRDX: ROCA

Ocado is an online supermarket and the largest online-only food retailer by turnover in the world.
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  1. Pingback: Ocado, Joules and H&M: what these IRUK Top100 retailers say about multichannel development - InternetRetailing

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