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Ocado looks forward to opening of second fulfillment centre

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Ocado’s long-awaited second fulfillment centre is set to open at the end of this month in a move that, it says, will demonstrate the “longer-term benefits” of its business model.

The online grocer’s second centre, in Dordon, Warwickshire, has now started receiving stock and the first customer orders are expected to be picked by the end of this month.

Ocado, which showed a narrowing of losses to £0.6m in its full-year results this week, says the move will substantially increase its capacity as it follows a strategy of profitable long-term growth, both through growing its base of loyal customers while also developing its offer on service, range and price.

Service improvements in the last year, it said, included the latest generation of mobile apps, at a time when 28% of checkouts are now over apps. It also introduced text messages to confirm expected 25 minute delivery windows, real-time order tracking, Facebook login and shopping through the BBC Good Food recipe website.

A non-food distribution centre has also opened in Welwyn Garden City, Hertfordshire, as the company expands its non-food sales.

The Ocado range expanded by more than 40% over the year to more than 28,000 products, while sales of its own-label range grew by 70%, year-on-year. A low-price promise launched, aimed at boosting confidence in its prices. Average basket spend stood at £112.17 over the year.

Tim Steiner, chief executive of Ocado, said: “Shopping online for groceries is clearly of increasing importance to consumers. In 2013, we will continue to improve the attractiveness of Ocado to customers and we shall substantially increase our capacity with the opening of our second fulfillment centre, creating over 1,000 jobs in the Midlands.”

In his review, he added: “As more and more shoppers leave physical stores to shop for their weekly groceries from the comfort of their own homes we have seen our competitors investing more into the online channel.

“We believe we are well-positioned to benefit from this continuing growth in online demand with our market-leading offer to customers, and unconstrained by the concerns of cannibalisation of existing stores.”

In the year to December 2, gross turnover rose 11.4% to £716.2m, while the company reported a pre-tax loss of £0.6m, from last year’s loss of £2.4m, an improvement of 57.1% or £1.4m.

Duncan Tatton-Brown, chief financial officer at Ocado, said the company had closed 2012 with “a solid financial platform and a cash position of £89.6m.” He added: “We have worked hard at improving overall efficiency in our operatins and margins are improving. The introduction of a significant increase in fufillment capacity this year to met growing demand and our continued efforts to drive efficiency will enable us to demonstrate the longer-term benefits of our business model.”

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