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.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
-
NFU Mutual and M&S among most trusted insurers as big brands beat smaller rivalsValue for money is a big concern for customers buying insurance, helping to send overall trust scores down to a four year low
-
Millions of shoppers can claim up to £70 compensation – do you qualify?Millions of shoppers will be able to claim their share of a £200 million settlement from Mastercard. We explain who's eligible, how the process will work, and when you could get the money
-
Investment opportunities in the world of Coca-ColaThere is far more to Coca-Cola than just one giant firm. The companies that bottle and distribute the ubiquitous soft drink are promising investments in their own right.
-
Streaming services are the new magic money tree for investors – but for how long?Opinion Streaming services are in full bloom and laden with profits, but beware – winter is coming, warns Matthew Lynn
-
'Pension funds shouldn't be pushed into private equity sector'Opinion The private-equity party is over, so don't push pension funds into the sector, says Merryn Somerset Webb.
-
Frasers Group 'is a rare retail gem in a battered sector'Opinion Frasers Group is shunned for a reason, but brave investors should buy in now, says Jamie Ward
-
Greg Abel: Warren Buffett’s heir takes the throneGreg Abel is considered a safe pair of hands as he takes centre stage at Berkshire Hathaway. But he arrives after one of the hardest acts to follow in investment history, Warren Buffett. Can he thrive?
-
Who will be the next Warren Buffett?Opinion There won’t be another Warren Buffett. Times have changed, and the opportunities are no longer there, says Matthew Lynn.
-
Will Comstock crash – or soar?Opinion The upside for Comstock, a solar panel-recycling and biomass-refining group, dwarfs the downside, says Dominic Frisby.
-
'As AGMs go digital, firms must offer a new form of scrutiny for shareholders'Opinion Technology has rendered big AGM meet-ups obsolete, but the board still needs to be held to account, says Matthew Lynn
