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

How to claim compensation for travel delays
Personal finance

How to claim compensation for travel delays

It promises to be a summer of chaos at airports, with thousands of flights cancelled and huge queues, while strikes on the railways haven't helped eit…
5 Jul 2022
Is it OK to buy Scottish Mortgage investment trust again?
Investment trusts

Is it OK to buy Scottish Mortgage investment trust again?

Scottish Mortgage investment was hit hard by the tech-stock crash, and it is still being buffeted by headwinds. Should new investors wait for those to…
5 Jul 2022
Britain’s ten most-hated shares – w/e 1 July
Stocks and shares

Britain’s ten most-hated shares – w/e 1 July

Rupert Hargreaves looks at Britain's ten most-hated shares, and what short-sellers are looking at now.
4 Jul 2022
Britain’s most-bought shares w/e 1 July
Stocks and shares

Britain’s most-bought shares w/e 1 July

A look at Britain’s most-bought shares in the week ending 1 July, providing an insight into how investors are thinking and where opportunities may lie…
4 Jul 2022

Most Popular

Ray Dalio’s shrewd $10bn bet on the collapse of European stocks
European stockmarkets

Ray Dalio’s shrewd $10bn bet on the collapse of European stocks

Ray Dalio’s Bridgewater hedge fund is putting its money on a collapse in European stocks. It’s likely to pay off, says Matthew Lynn.
3 Jul 2022
UK house prices are definitely cooling off – but are they heading for a fall?
House prices

UK house prices are definitely cooling off – but are they heading for a fall?

UK house prices hit a fresh high in June, but as interest rates start to rise, the market is cooling John Stepek assesses just how much of an effect h…
30 Jun 2022
Persimmon yields 12.3%, but can you trust the company to deliver?
Share tips

Persimmon yields 12.3%, but can you trust the company to deliver?

With a dividend yield of 12.3%, Persimmon looks like a highly attractive prospect for income investors. But that sort of yield can also indicate compa…
1 Jul 2022