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Ocado marks ‘transformational’ year with rising sales, but falling profits

Ocado marks 'transformational' year with rising sales

Ocado has reported rising sales and profits after a “transformational year” in which it has introduced new robotic solutions to its warehouses, enabled shoppers to buy via voice, and won more customers in the UK and Europe for its technology platform.

The online grocer today reported group revenue of £1.46bn in the 53 weeks to December 3, 12.4% up on the same time last year although pre-tax profits of £1m fell by 104.1% from £12.1m a year earlier, following its introduction of the national living wage, and costs related to the opening of its Andover fulfilment centre as well as investments in “strategic initiatives to aid further growth”.

Chief executive Tim Steiner said: “The last 12 months have been transformational for Ocado. We have primed our Ocado Solutions business for growth and received an important validation of the business model through our latest partnerships with Groupe Casino and Sobeys. Looking ahead, we are confident that we will be able to do further deals with the momentum of new signings building over time.

Steiner added: “Now is the time to take advantage of our growth opportunities. We will invest to ramp up our new solution in both Erith and Andover and to have the right resources in place to meet growing demand for the Ocado Solutions offer. We believe that taking advantage of these international opportunities now will make our virtuous cycle turn faster in the years ahead and we expect that to translate into higher returns on capital. We look forward to our future opportunities and challenges.”

Here’s what the retailer said about its multichannel strategy.

Customer-facing technology

During the year Ocado became the first UK grocer to use enable voice-activated shopping for its customers, via Amazon’s Alexa devices.

It won more customers, increasing its active customer numbers by 11.2% to 645,000. Order volumes grew at the same time, by 14.3% to 263,0000. Its biggest week of the year saw 296,000 orders delivered. Growth came as uptake of the subscription delivery-based Ocado Smart Pass increased and more people ordered via their mobile phones. These two factors, said Ocado, had an effect on basket values, which fell slightly to £107.20. The trend of ordering via mobile phone, said Ocado, resulted “in customers ordering slightly smaller baskets more frequently.”

Operations and logistics

Ocado increased capacity at its Andover customer fulfilment centre during 2017 and expects to continue to do so in 2018. Meanwhile, its fourth centre, in Erith, North London, is due to open this year.

Commercial partners

Ocado boosted its service to its first commercial partner,, when it rolled out store-picking capabilities that extend Morrisons’ ability to serve online customers in areas of the country not served by Ocado’s fulfilment centres.

During the year it also won new three international partners, including Groupe Casino in France and Sobeys in Canada. Both will use its technology platform and physical infrastructure solutions. Now Ocado is in discussions with “multiple retailers in a variety of geographies” about its Ocado Solutions and how they might support their online businesses.

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