Value-led offers lead Ocado back to growth

Ocado Retail returned to growth in the number of items sold for the first time since the COVID-19 pandemic in the last month of its latest quarter, as it gained more customers who shopped more regularly at the online supermarket.

The volume growth helped the 50-50 joint venture between Ocado Group and Marks & Spencer report a 7.2 per cent rise in revenue to 570 million pounds in its third quarter to Aug 27, up from 5 per cent growth in the first half.

Online’s share of Britain’s total grocery market was about 7 per cent before the onset of COVID-19 in 2020. It peaked at about 15 per cent during the coronavirus pandemic, but has since fallen back to about 10 per cent as shoppers returned to stores.

Ocado Retail CEO Hannah Gibson told reporters the volume growth reflected a 1.5 per cent increase in active customers to 961,000, a 1.9% rise in average orders per week to 381,000 and a stabilisation in average basket size at 44 items.

Commenting on the figures, Joe Dawson, Retail Analyst at GlobalData, said the focus for CEO Hannah Gibson was on “perfect execution” which was ensuring deliveries were on time and in full and enticing more consumers with value-led propositions.

“These efforts have paid off, with a 1.5 per cent increase in active customers to 961,000 and a growth of 6.6 per cent in the number of mature customers (customers that have made at least five shops with Ocado) over the period. Price cuts successfully navigated the boundary between increasing volumes and hurting turnover gains, as the average basket value increased 4.2 per cent to £120.7, and average orders per week grew 1.9 per cent to 381,000. However, the slight drop in items per basket from 45 to 44 might suggest consumer budgets still haven’t recovered and some shoppers are also shopping elsewhere a bit more.

“The retailer announced it would be shutting its Hatfield customer fulfilment centre back in April 2023, and will be opening a new one in Luton in September 2023 which it expects will be twice as productive. This will put Ocado in good stead to capitalise on the increased demand for online groceries over the festive period and combined with the launch of new lines with Marks & Spencer in Autumn, this will be key to boosting sales in calendar Q4 2023. As inflation slows down and consumers recover purchasing power, the grocer must cement itself as the first port of call for new and returning online grocery shoppers by highlighting its high-quality range and convenience.”