UK grocery e-tailer finds online resistance to recession
Highlighting the potential of grocery retailing, UK specialist online grocer Ocado has recorded a year-on-year sales boost of more than 30 per cent.
Co-founder Jason Gissing said the company, which sells goods from upmarket retailer Waitrose, would have sales this year of around £450m (A$930m), up from just under £400m (A$830m) last year.
“The economy is horrible at the moment but our growth is accelerating,” he noted.
Success has accelerated for the business after they carried out customer research to ascertain why growth was beginning to stall last year. The survey discovered consumers thought they were a bit expensive, had concerns about the life of the product and wanted a more extensive range.
Since then they have launched a price-match initiative, implemented an idea to display guaranteed use-by dates on the website and receipts and expanded their range. Such changes have been credited with stimulating consumer demand.
The company is still making a loss but Mr Gissing said that a profit was not far away, although costs on future development would prevent a profit in coming months.
Ocado is also poised to expand internationally within a couple of years, according to Mr Gissing.
“We now have a blueprint in the UK which works and just need to find a partner in another country with a brand and proposition which is compelling. Because we have done all the groundwork here, any international business will generate a profit within two to three years,” he commented.
The competition in the UK online grocery sector is beginning to heat up, with Waitrose – which holds a minor stake in Ocado – deciding to abolish delivery charges. The move is one Managing Director Mark Price believes shoppers have been calling for.
“Customers tell us they don’t like delivery charges or short-term gimmicks. Prices go up and down depending on the times in the day. It’s confusing and it penalises some households,” he said. “We’re listening and we believe it’s time for clarity – transparency and free delivery as standard no matter what time or day.”
Grocery retail is expected by many analysts to be a major online growth area in the decade ahead, with UK research suggesting it could lay claim to the leading spot in online retail (excluding travel) as early 2013. Currently, it has around a 2.5% share of the grocery market in the UK and less than that here in Australia – where the major supermarkets have yet to go national with their offerings. Australian consumers, like the major retailers, have been reluctant to embrace it thus far.
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