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Ocado reports growth in new customers as more go online to buy groceries

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Ocado today said shoppers were continuing to move online to buy their groceries, as it reported a 30% rise in new customer numbers in the first half of its financial year.

The online grocer today reported gross sales of £511.9m in the 24 weeks to May 17, 15.7% up on the same time last year, while revenue of £507.7m was 18.2% up on last time. Pre-tax profits of £7.2m were down on last year’s £7.5m. At the same time, the 30% rise in new customer acquisitions pushed total active customer numbers up by 18.9% to 471,000, from 396,000 last time. Price deflation meant that while the average number of items in a basket did not change, the value of that average basket fell to £111.68 from £114.43. Average orders per week grew by 18.6% to 191,999 from 161,000 last time.

“The channel shift towards online grocery shopping continued during the period,” said Tim Steiner, chief executive at Ocado, “with the broader grocery market remaining characterised by intense price competition and deflationary pressures. Against this backdrop, our relentless focus on customer satisfaction continues to drive customer numbers and like-for-like sales ahead of the online grocery market.”

Not only did customers move to shop online, they also opted to buy via mobile. Ocado said more than 50% of orders were checked out using a mobile device, over both apps and browsers, while the first Apple Watch app was also launched. A “positive shopping experience,” it said, was vital in encouraging customers to try out its service and return again. That meant improving the speed, convenience and ease of using the service, while also being “where our customers interact” – and that means mobile. Ocado has also trialled click and collect and says this will continue “on a limited basis”.

The company, whose technology and fulfilment resources are now being used in the UK to underpin Morrisons.com (which reported annualised run-rate sales of about £200m in its first year of trading), said it aimed to sign its first international agreement to provide that service to a retailer outside the UK. Discussions with “multiple potential international partners” to adopt Ocado Smart Platform were ongoing.

“We are excited by the possibility,” said Steiner, “and reiterate our target of signing a first agreement during 2015.”

Ocado develops its own software and said had taken its total technology staff headhunt to 620 by the end of the half-year, while internal development costs reached £7.7m during that period. It is currently replatforming its systems to run on the cloud in a move that it says will give it “greater technical agility and enable the technology to support possible international expansion opportunities.”

The company is also preparing to launch an ecommerce health and beauty business in partnership with Marie Claire, as first announced in February.

Commenting on the figures, Bryan Roberts, director, retail insights at Kantar Retail, said: “On the trading front, Ocado continues to grow ahead of the market, although the ongoing erosion in average order size speaks to the deflation in the marketplace and smaller average purchase values from the Fetch and Sizzle specialist websites. The direction of travel for operating profitability is a satisfying development for the business and reflects the benefits of Morrisons-assisted scale and leverage set against recent increases in capacity.

“Clearly, this relatively benign update on trading will be overshadowed by the lack of concrete news on Ocado’s much-vaunted first international partnership. While Ocado remains convinced its first global deal will be signed in 2015, the shortage of anything to communicate today is set to reverse some of the company’s recent effervescence in terms of share price.”

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