Ocado Retail, the online grocery delivery service known for its distinctive purple vans, is celebrating its 25th anniversary this year, demonstrating a notable comeback as it continues to redefine the landscape of grocery shopping. Founded in January 2000, the company has successfully catered to its middle-class customer base, offering a variety of healthy options alongside indulgent treats.
The company’s joint venture with Marks & Spencer (M&S), initiated in September 2020, has faced challenges. Recently, criticism arose from M&S regarding Ocado's failure to leverage its customer insights effectively. M&S chairman Archie Norman voiced his concerns, stating at the company's 2023 annual meeting that he was "not happy." However, optimism seems to be on the rise as M&S has reported a robust performance through the Ocado platform, with sales described as "particularly strong" by M&S chief executive Stuart Machin.
During a recent tour of the Luton hub, Ocado Retail's CEO Hannah Gibson highlighted the company's impressive record of 500,000 orders per week, indicating potential growth as the holiday season approached. Some items popular among shoppers included M&S clementines, white mulled wine, and a festive charcuterie board shaped like a Christmas tree. Market insights from Kantar revealed that Ocado sales surged by 9.6 per cent over a three-month period ending December 29, outperforming competitors such as Sainsbury’s and Tesco.
The Luton facility exemplifies Ocado's investment in technology, with robots operating seamlessly on a 4G network. These robots are capable of processing an order of 50 items in as little as ten minutes, illustrating Ocado’s commitment to efficiency and customer satisfaction. Although the company enjoyed significant success during the pandemic, with its share price reaching a high of 2,777p in January 2021, the post-pandemic market has introduced increased competition. The share price has since dropped to 279p, marking a decline of 65 per cent since Christmas 2023.
Despite these market challenges, Gibson asserts that Ocado has improved its pricing strategy, stating, “Our customers are saying we are better value than we have ever been.” She noted the importance of adapting to customer expectations post-pandemic and identified a competitive shift as consumers from discount retailers like Aldi and Lidl are beginning to explore Ocado for their shopping needs.
On the broader industry front, Gibson's views reflected concerns over retail pressures, highlighting that inflation rates are likely to exceed previous estimates, driven in part by rising wage costs due to the National Living Wage increase. She acknowledged a looming need for some retailers to automate their workforce to manage cost pressures. Nevertheless, Gibson committed to Ocado’s focus on job creation, including hiring more drivers, whom she described as consistently providing excellent customer service.
As the online grocery sector evolves, Ocado is strategically positioning itself to capitalise on market opportunities and technological advancements, balancing between maintaining customer satisfaction and addressing economic challenges. The forthcoming trading statement is expected to shed more light on the company's recent performance as it heads into the new year.
Source: Noah Wire Services