Ocado invests in technology to entice international partners

Ocado invests in technology to entice international partners

British online food retailer Ocado managed an 18 % turnover increase in the first half of its fiscal year, until 17 May. Operational profit grew 11 % but its EBITDA dropped 4 % to 7.2 million British pounds (10.2 million euro), while its net debt more than doubled because of huge investments.

Technology to better serve the consumer

This evolution in the numbers is indicative of what type of company Ocado is. It has always invested huge sums into top-notch technology so that it can offer the best service for as many online customers as possible. Many additional investments in this first half of the year coincide with the development of Ocado's third 'customer fulfillment center' (CFC), handling online orders with great speed and fully automated.


In its first two CFC's, Ocado already managed an unsurpassed handling speed of 153 products per hour, thanks to innovative technology, but its new CFC Dordon has even managed 170 products per hour, according to Ocado. 95.6 % of orders are finished on time and 99.3 % are completely accurate. This is also reflected in consumer satisfaction as its number of customers grew 30 %, while the number of customers placing a second order within 12 weeks went up 19 %, to 471,000.


More orders, larger product range

Over the past six months, Ocado's orders have grown to 191,000 per week, compared to 161,000 a year ago. The average spend per order did come under pressure, dropping 2.4 % to 111.68 pounds (158 euro).


The company did expand its product range with an astonishing 10,000 items, which gives customers more than 45,000 products in total to choose from. More than half of all orders came from mobile appliances, thanks to new versions of the apps designed specifically for mobile appliances.


Satisfied customers and new partners

The British food retail branch faces continuous price pressure and that makes Ocado's advances all the more remarkable. "Against this backdrop, our relentless focus on customer satisfaction continues to drive customer numbers and like-for-like sales ahead of the online grocery market", CEO Jim Steiner said in a press release.

"Our continuous commitment to constant innovation in technology not only allows us to give industry-leading service to our customers at home but to offer our end-to-end platform solution to retailers outside the UK."


"Goal is a new partner in 2015"

It is exactly that both Steiner and his employees and investors are eagerly anticipating: A year ago, Ocado had excellent results for its first six months as well and Steiner mentioned a possible collaboration with a foreign retailer back then as well. Unfortunately for Ocado, that statement never came to fruition.


Steiner predicts it will happen this time around: "We are excited by the possibility and reiterate our target of signing a first agreement during 2015." Ocado confirms that talks with "multiple parties advanced further with a view to utilising Ocado Smart Platform".


Retail technology will become Ocado's core activity

If that happens, Ocado's profitability will increase tremendously, after a deal with British retailer Morrisons in early 2014 was the start of the company's profitability. It will be incredibly expensive for any new partner to use the Ocado platform, but it will still be a mere fraction of the cost they would have to endure if those retailers wanted to re-invent the online wheel themselves.


On top of that: any retailer thinking of starting such a venture in 2015, is probably late to the party. That makes Ocado an interesting proposition, despite the undoubtedly expensive price tag attached to its services. If Ocado manages to find one or even multiple partners, this quirky online retailer will no longer be a retail company, but a retail technology company, which is a slightly different core activity, but it has huge potential in Great Britain.

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