ESM: European Supermarket Magazine is proud to launch 'The A-Z of Retail', a new subscriber-only series that offers a deep analysis of the retailers, suppliers and individuals making the news each week. Today: O is for Ocado.
Ocado has finally come of age.
Some 18 years after its foundation, the online grocer has published what its co-founder and CEO has called "transformational" results; with the company announcing annual figures that were split between its two subsidiaries, Retail and Ocado Solutions, for the first time.
Its Retail business saw revenue growth of 12.4%, while Ocado Solutions grew by 16.2%. Overall, the group posted revenue of £1.46 billion in 2017, representing growth of 12.7% compared to the year before.
As Steiner explained, the nascent Ocado Solutions side of the business has become a driving force behind the company's overall growth, and the company is now looking forward to expanding the company’s recent international partnerships.
"We have primed our Ocado Solutions business for growth and received an important validation of the business model through our latest partnerships with Groupe Casino and Sobeys," Steiner said.
Analysts gave the results a mixed response, with Barclays European Food Retail Equity Research saying the retailer's statement 'treads negatively regarding short/medium-term profitability, but encouragingly regarding the signing of further deals'.
Long-Awaited Expansion
It's taken a while for Ocado to get to this point. The online retailer started off by offering its Solutions technologies to UK retailers such as Waitrose and Morrisons, before spreading its wings overseas.
After hinting at international expansion for a while, the Solutions arm finally extended beyond the UK last year, with its first partnership across the Channel with France’s Groupe Casino.
“Ocado has pleasantly surprised for once,” said Clive Black, Shore Capital, at the time the Casino partnership was announced.
“After years of teasing about potential internationalisation, the group has actually announced that it has nearly signed a deal. The transaction is not with an obscure Nordic business, but no other than Groupe Casino, across the Channel in France. Who says Brexit could end the Entente Cordiale?”
And just at the beginning of this year, the company crossed the Atlantic and joined forces with Canada’s second-largest food retailer Sobeys, a signal of potential incursion by Ocado into Amazon’s turf in North America.
Technological Strides
Ocado’s technological advancements have made strides with innovations akin to science fiction. One of the more avant-garde outputs of its tech arm is the company’s recent unveiling of its robot SecondHands, which looks like a distant cousin of C-3PO from Star Wars.
The robot was developed in partnership with several higher education institutes and is designed to help engineers looking after Ocado’s handling systems.
The company has also invested a considerable amount into the development of technology to manage home deliveries. It uses hundreds of battery-powered robots to shift boxes of groceries at its newest warehouse in Andover, Hampshire, as well as expanding its Erith facility.
It’s also currently developing the Ocado Smart Platform technology for online grocery services, which also performed well in 2017, and is developing packing robots to grasp diverse products such as hazardous bottles of bleach to fragile goods like avocados and eggs.
Retail Business
The company’s Retail business has made ‘significant progress’ over the past year too, expanding its online range to more than 49,000 products. Ocado Retail grew its customer base by 11.2% to 645,000, with total order volume growing by 14.3%.
The company said that, assuming economic conditions remain largely stable, revenue growth in its Retail business is anticipated to reach between 10-15% in the 2018 financial year, growing its capacity and market share.
"Now is the time to take advantage of our growth opportunities," Steiner said at the launch of yesterday's results.
Analysts, who had to wait some time for Ocado to turn over a profit, let alone develop a solid growth platform, will be eager to see what the company has in store.
© 2018 European Supermarket Magazine – your source for the latest retail news. Article by Kevin Duggan. Click subscribe to sign up to ESM: The European Supermarket Magazine.
