A 14% increase in sales has seen Ocado profits rise for the half-year period, ending 31 May, giving the online grocery firm a chance to thumb its nose at new market entrants such as Amazon and Uber.
Retail sales were up 13.9% to £582.9m. Pre-tax profits stood at to £8.5m, which is up from £7.2m for the same period last year, which represents a 15% increase.
Although Ocado’s share price slumped in the wake of the UK launch of AmazonFresh earlier this month, there was a noticeable recovery following the results’ announcement.
The online grocery shopping market is growing, and while that stands to benefit many retailers, Ocado clearly believes that it provides a level of service and a breadth of offering that will mean it will win out.
Ocado’s chief executive, Tim Steiner, said: “We have been gaining share in the online grocery market and expect this to continue. The last few years have shown beyond doubt that British shoppers are choosing the benefits of grocery shopping online and we believe that the momentum of channel shift away from bricks and mortar stores will continue.
“The more opportunities customers have to try grocery shopping online, the more they will be attracted to Ocado’s superior customer offer.”
Commenting on the results, Rupal Karia, managing director of retail & hospitality, at Fujitsu, cautioned against complacency and stressed the importance of always being ready to meet customers’ changing needs.
“These latest results from Ocado are a positive one for the grocery industry, especially given the turbulent retail landscape that they face today. With healthy profit figures, we are seeing that Ocado still has a place on the UK grocery sector.
“Ocado and other grocers mustn’t become complacent however. Recent deals, such as Amazon’s collaboration with Morrison’s and the launch of AmazonFresh have highlighted the importance for retailers and grocers to continue to innovate and find new offerings, or else risk losing their market shares to companies who are willing to go that extra mile to meet the advancing needs of customers.
“It’s imperative that retailers give customers flexibility, and the option to shop in-store, buy online, or use click and collect. Digital offerings such as these have created a new savvy shopper, allowing them to shop how, when and where they wish. Retailers and grocers need to take note and ensure that they too are providing their customers with the relevant channels for their shopping needs and not run the risk of freezing out customers for failing to do so.”
The eDelivery View:
A lawyer once said to me “when it comes to my services, clients can have good, fast, or cheap – they can have a combination of two but never all three.”
Twas ever thus in etail fulfillment.
The biggest story in the food retail sector in the last five years has been the seemingly unstoppable rise of the discount retailer. Vying with it for the top spot in my extremely unofficial and unscientific list of biggest stories in the food retail sector in the last five years would be the shift from single trips to a large supermarket to buy a whole week’s worth of groceries to an approach more geared around convenience; grazing rather than feasting.
Loyalty schemes, much beloved of the grocery trade, are a shadow of what they once were, and the very concept of loyalty – from the customer perspective at least – is now a very different beast.
There’s always been a lot of emphasis, across the full spectrum of retail delivery, on the provision of fast and cheap. There still is. But increasingly customers are looking for good; it’s why nominated-day delivery is preferred by many to standard next-day delivery options.
Convenience is the key to understanding the new multichannel customer mindset. Yes, it has a lot to do with delivery. But it’s also about range, choice, quality and a whole lot more.
There’s still a lot of growing room in online food shopping. The recent launch of UberEats, as covered in eDelivery last week, is more likely to grow the market for takeaway and restaurant delivery than steal business away from any existing suppliers. AmazonFresh will appeal to loyal Amazon Prime customers, although how many of those there actually are in the UK, no one outside of Amazon knows.
Ocado’s latest results show a positive trajectory, but they don’t cover the period since AmazonFresh launched – the next set of results will give an indication as to whether that will have made a significant impact.
If Amazon continues to push service levels and expectations, particularly around product range and availability, of course it will do well. But the likes of Tesco and Ocado, who are already so far ahead in many important considerations, will have to keep pace. If they can do that we may even see Amazon fail to get a foothold outside of metropolitan areas.