Ocado losses widen due to drop in customer spend and rise in delivery costs

Ocado fell to a loss of more than £200 million in the first half of this year as the online grocer battled the dual effects of falling customer spend and rising fuel costs, stated reports today (21).

At 867,000, there have never been more active Ocado shoppers, but with UK households facing their biggest income squeeze for decades, Ocado is facing a sharp fall in the amount of groceries being ordered, The Times reported.

In the opening six months of this year, the average Ocado order was £120, down 13 per cent from £138 in the same period of last year. That was despite the company pushing up its prices by an average of 3 per cent.

Ocado has attributed the down in average order partly to shoppers buying smaller pack sizes and less alcohol, as well as opting for cheaper burgers over expensive steaks.

“We are not seeing as much inflation on the goods that we sell than we read about in the newspaper and see in Kantar (industry) data,” CEO Tim Steiner told reporters. With basket sizes close to pre-pandemic levels they were unlikely to decline much further, he added.

Ocado is betting its heavy investment into robotics and machine learning for its logistics and distribution operations will be enough to reassure investors that long-term profitability will supplant short-term losses. The company says it is already working with 11 leading grocers to provide the technology for their online grocery operations.

It comes as UK grocery inflation was reported to be touching new highs at 9.9 percent in the four weeks to July 10, adding 454 pounds to Britons’ annual bills amid.

Market researcher Kantar said on Tuesday (19) that the inflation rate was the second highest it has seen since it started tracking supermarket prices in this way in 2008.

“We’re likely to surpass the previous high come August,” warned Fraser McKevitt, Kantar’s head of retail and consumer insight.