Ocado Rises Up

Stuart Elmes

 

We’ve spent a lot of time and words letting you know about the changes that are coming in the grocery industry. As corporate titans make huge investments in online platforms, logistics, shoppable everything, and same-day delivery, the supermarket paradigm is shifting into an omnichannel experience that delivers unprecedented levels of freedom, choice, and convenience to the public. And one British company has embraced these changes and built a foundation for massive success in the coming years: Ocado.


Ocado’s business model is a model of pragmatism. Their Solutions branch puts technological innovation to work for established brands looking to compete in the online arena. Meanwhile, a partnership with M&S combines Ocado’s eCommerce sales expertise with the august brand under the aegis of Ocado Retail Limited. The company also profits from finding applications for the technology they develop, such as AI enabled automated warehouses, outside of the FMCG/CPG industry.


Technology Driving Sales

2020 looks like it might be the year of Ocado. Kantar data for the 12 weeks leading up to January 27th of this year shows that Ocado’s sales and market share were increasing more quickly than any of the “Big 4” UK grocers. The company’s sales rose 11.2% year on year during the period, while its market share increased from 1.2% to 1.4%. While this is still a small piece of the pie, Ocado’s growth is coming at a time when Morrison’s, Tesco, Sainsbury’s, and Asda all experienced negative growth. 


Furthermore, the company is rapidly expanding into regions where it previously struggled to find a foothold. Traditionally its sales have been centred in London and the urban and suburban areas of southern England, but recently it has been conquering the north, with data showing 17% growth in the region according to Fraser McKevitt, Kantar’s head of retail insight. Momentum is continuing to build following a summer when Ocado earned the status of the UK’s fastest growing grocer, and we would be surprised if the company doesn’t maintain that status throughout 2020.


Reasons For Success

One of the key drivers of this impressive growth is the company’s new partnership with M&S. Ocado had previously been aligned with Waitrose, but is in the process of changing over, as M&S paid a staggering 750 million pounds to acquire a half share of Ocado’s retail division in 2019. M&S CEO Steve Rowe decided that the hefty price tag was justified by the company’s need to manufacture an online presence after neglecting to develop that aspect of its business for years. The partnership seems of a piece with current trends, in that it mirrors Amazon’s acquisition of Whole Foods, teaming a trusted retailer with a tech company that has the knowledge and technology to deliver both groceries and profits. 


For Ocado, the decision to find a new partner was not motivated solely by the massive sum they received, but also by the potential for growth that M&S unlocks. They tout the fact that they’ll have the ability to offer 50% more products, lower prices, and a higher quality of comestibles with the venerable M&S. Ocado CFO Duncan Tatton-Brown reports that they’ll soon have 6,000 products available, compared to 4,000 under the old partnership. He states that “Marks & Spencer has a lot more products than Waitrose so customers should find matching products from the existing range at the same or a cheaper price – and a few things they didn’t know they needed.”


The move has appeared to be good for business, as Ocado’s average orders per week increased from 317,000 to 350,000 in December. Meanwhile, Ocado’s stock, which had languished for the better part of a decade, has been attracting investors recently. Driven by this news and recent deals to open automated warehouses in partnership with American retail giant Kroger and massive Japanese supermarket chain Aeon, the stock has approximately quadrupled in value over a two year period.


Delivering the Future

The current moment is essentially the culmination of trends that have been percolating for the past few years. InstaCart and Amazon were the earliest to realize the potential of eCommerce sales and delivery in the grocery industry, but Ocado has been tirelessly working to create the logistics and supply chain innovations that will make this mode of shopping irresistibly convenient to the public. While the spread of eCommerce sales and home delivery has been slower than some predicted, the sector continues to show steady growth. And as retailers refine their models, looking to create a blend of all the elements of traditional stores that consumers can’t live without, along with the ease and convenience that online grocery offers, companies like Ocado are poised to grab a massive slice of the pie.


If you’re a brand or retailer that hasn’t yet developed an eCommerce platform capable of delivering sales, convenience, and same-day delivery, you’re going to have your work cut out for you. It can be prohibitively expensive to put in place an effective, leading-edge online sales platform, or to create the transportation and supply chain infrastructure needed to compete in this brave new world. This is why companies are so eager to partner with innovative, solution-oriented online players like Ocado. If you’re looking for ways to evolve into an eCommerce player, Adimo can help. With technology that ensures frictionless shoppability at any point in the sales funnel, Adimo could be the first step towards growing your business into the next online success story.