Ocado: lockdown proves lucrative for online grocer

Online retailer Ocado has declared that it has seen “unprecedented demand” for online grocery shopping in the UK.

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.

Recommended

Cryptocurrency roundup: Putin backs crypto-mining, and spoof McDonald’s coin takes off
Bitcoin & crypto

Cryptocurrency roundup: Putin backs crypto-mining, and spoof McDonald’s coin takes off

Saloni Sardana looks at the cryptocurrency stories that caught our eye this week.
28 Jan 2022
Are recession fears justified? Maybe it’s time to look on the bright side
Economy

Are recession fears justified? Maybe it’s time to look on the bright side

There's a lot to feel nervous about right now, and many people are worrying about an impending recession. But it's by no means certain, says John Step…
28 Jan 2022
Making money is about to get much harder
Investment strategy

Making money is about to get much harder

Soaring inflation, geopolitical risk, bubbly stockmarkets - getting a return on your investment is going to get much more difficult – but not impossib…
28 Jan 2022
How to invest in the chipmakers fixing the semiconductor shortage
Share tips

How to invest in the chipmakers fixing the semiconductor shortage

Last year’s chip crunch brought home how dependent the world is on these tiny pieces of silicon. Chipmakers are rushing to build new factories. Will t…
28 Jan 2022

Most Popular

Shareholder capitalism: why we must return power to listed companies’ ultimate owners
Investment strategy

Shareholder capitalism: why we must return power to listed companies’ ultimate owners

Under our system of shareholder capitalism it's not fund managers, it‘s the individual investors – the company's ultimate owners – who should be telli…
24 Jan 2022
Temple Bar’s Ian Lance and Nick Purves: the essence of value investing
Investment strategy

Temple Bar’s Ian Lance and Nick Purves: the essence of value investing

Ian Lance and Nick Purves of the Temple Bar investment trust explain the essence of “value investing” – buying something for less than its intrinsic v…
14 Jan 2022
Three innovative Asian stocks to buy now
Share tips

Three innovative Asian stocks to buy now

Professional investor Fay Ren of the Cerno Pacific Fund highlights three of her favourite Asian stocks to buy now
24 Jan 2022