Ocado today reported a 40% rise in retail sales in the first quarter of its financial year, as shoppers bought larger orders ahead of Christmas and in the third lockdown – and set out how it will expand its distribution capacity over the rest of the year.
Ocado today reported retail sales of £599m in the 13 weeks between November 29 and February 28 – 39.7% up on the same time last year. The online grocer and technology company delivered an average of 329,000 orders a week over the quarter, up by 2.5% or 8,000 a week from 321,000 at the same time last year. Sales growth mostly came as basket size rose to an average of £147 over the Christmas and lockdown period. M&S products made up a quarter (25%) of the average basket. The retailer’s sales are limited by its distribution capacity and its automated, pureplay model has not been able to flex as quickly as those of its multichannel competitors during the Covid-19 pandemic.
Ocado Retail, run as a joint venture with M&S since 2020, is taking steps to improve its distribution capacity from about 374,000 orders a week at the start of the year and says that by the end of the 2021 financial year its capacity should be 40% larger. During the first quarter, it opened the first of a planned series of mini customer fulfilment centres (CFC), in Bristol – adding capacity for 30,000 orders a week, while its Erith site has grown capacity to 150,000 orders a week. Capacity will be further increased when its Purfleet (85,000 orders/week) CFC opens and its Andover (60,000) site reopens following a fire in February 2019.
Ocado, a Leading retailer in RXUK Top500 research, predicts retail sales will continue to grow in the second quarter of its year thanks to that expansion of distribution capacity.
Ocado Retail chief executive Melanie Smith says: “Over the past year, large numbers of UK consumers have made a permanent shift to online grocery shopping. Ocado Retail is best placed to serve these customers as we continue to improve the customer experience through the joint venture with M&S, adding new products offering greater value and maintaining high customer service levels.”
She adds: “Q2 2021 represents the one-year start of the Covid-19 pandemic, which accelerated the demand for online grocery; while this year’s quarter sales figure will reflect the year-on-year comparisons with periods of full lockdown, we expect strong growth over the coming years as we continue to lead the charge in changing the UK grocery landscape, for good.”
Beyond Ocado Retail, Ocado Group supplies its technology and fulfilment centre model to third-party retailers in other markets – benefiting via those retailers from the shift to ecommerce around the world.
Tim Steiner, chief executive of Ocado Group and chairman of Ocado Retail, says: “Over the last twelve months, there has been a dramatic and permanent shift towards online grocery shopping around the world. Millions of customers have experienced online grocery shopping through the pandemic and many of them will not be going back to bricks and mortar. As we progress towards a new normal for grocery retail, and the focus for the industry shifts from meeting unprecedented demand to winning in a large and growing online channel, the need for a fulfilment solution that both delights a more knowledgeable customer, and enables profitable, sustainable growth, has never been more critical.
“This is the solution that Ocado’s partners are now rolling out in many countries across the world. The first international partners to go live, Sobeys and Groupe Casino, have reported a very encouraging customer response and we look forward to the official opening of the first Customer Fulfilment Centres for our US partner Kroger in the coming weeks.
“Ocado Retail, of course, is the most advanced in demonstrating the power of the solution. It has proven that the model consistently delivers the best online customer experience in grocery with leading economics. We believe that the prospects for Ocado Retail, as well as our other Solutions partners, are very promising.”