Ocado: lockdown proves lucrative for online grocer

(Image credit: © PAUL ELLIS/AFP via Getty Images)

published 16 July 2020

Online retailer Ocado has declared that it has seen “unprecedented demand” for online grocery shopping in the UK “with a 27% leap in sales over the last six months”, says Jim Armitage in the Evening Standard. Ocado’s CEO, Tim Steiner, has said that the firm has not only seen “years of growth” in the online grocery market condensed into a “matter of months”, but he also predicts that consumers “won’t be going back” to shopping in physical stores.

Ocado has clearly done well from the “exceptional trading conditions”, with sales up by 40% year-on-year at the end of the reporting period, says Andrea Felsted on Bloomberg. However, its shortage of capacity “prevented it from fully capturing demand” at the peak of the crisis, while the online arms of traditional retailers have exploited their “vast store networks” by adding more delivery vans. Ocado therefore needs to invest more in infrastructure to ensure “it gets its share of the growing online grocery market rather than let it slip to the incumbent supermarkets”.

It’s true that Ocado’s UK sales growth was less than that reported by mainstream supermarkets, says Jonathan Eley in the Financial Times. Still, Ocado’s management argues that the “store-pick model” used by supermarkets has “structurally weaker profit margins” compared with Ocado’s “centralised warehouse model”. In any case, since Ocado has always found it “easier to poach” customers from supermarkets than find them elsewhere, the company will eventually benefit from the expansion of capacity at Tesco and Sainsbury’s.