Ocado – The Rise of the Online Grocery Fulfilment Business.

Ocado Logo

Back in 2014, Waitrose withdrew from a 10-year contract with Ocado which sent Ocado shares plummeting.  I said at the time, replying to a Business Forum board question on buying shares in Ocado, “For those who had shares in Ocado to hold onto them and buy more if they could, as the price was low – 58p”.

I was flamed in the forum board, with many saying I did not know what I was talking about… some were quite offensive.  I pointed out that although I was not a trader in shares I did understand the online part of their business model.

We see on the BBC report today, that their shares have just topped 886p with the news that they have struck a deal to supply their platform to Kroger one of the largest grocery businesses in the world.

Ocado know their customers

At the time I was researching the various business models used by online retailers and specifically those larger organisations that seemed to be leading the way.  The one fundamental flaw in many of them was their lack of appreciation of their online customers.  Their websites were hard to navigate and made the process of shopping more difficult than going to the shops themselves.

There was take up by online customers who had persevered in completing their tasks but many new to the platforms stayed away.

You must remember, at the time many were still investing in new stores. They had a vested interest in keeping the footfall high to pay for the staff and locations they had purchased. They started as bricks and mortar companies and had difficulty in recognising the customers move from the High Street to the out of town centres to the internet.

Ocado started on the internet.  Back in the halcyon days of the dot com boom of 2001.  They secured investment and realised that to get the customers to buy online required a different approach and customer service was at the pinnacle of their objectives.  Their systems had to respond to customer needs and they had to make the site as user friendly with low barriers and high completion rates.  The realised that they had to be the place that customers could complete their tasks when shopping for groceries.

My first experience of Ocado

My first experience of Ocado was in the departure lounge of Sofia International Airport in 2010.  I had been delivering a keynote speech at a business conference.  I was awaiting my return flight and entered a conversation with a business woman who was also flying back to London.  She apologised and started tapping into her tablet saying I am ordering food for the house.

She lived in London and said that she had been away for 3 weeks working in Sofia.  She had left the house empty of food and wanted some milk, breakfast cereal and other things so she could make a meal when she go home.  I said they will not deliver until the next day and as our flight was not getting into London until 7:00pm they would not deliver before she was home. Her response was quite surprising as she told me that Ocado delivered up to 10:00pm and she had used them many times before for the same purpose.  She added that the delivery could be slotted to a one-hour window and that as she expected to get home by 8:30pm she would be there for the last slot of the day.

I had a text from her a few days later confirming that her groceries had been delivered.

It is the years of learning about their customers that have made Ocado a serious player in the market and that is why they are getting the approaches from international traders who want to use their technology in their own countries.  Ocado will probably make as much from the Licencing of their technology as they do from online sales.

What about the rest of us?

The internet high street is accessible from anywhere you have an internet connection.  If you retail business is not on the internet and selling your products, then you are missing out on the £3billion being spent online in the UK every week.

The key element of success is understanding your online customers their tasks and their path to task completion.

If you look at many of the big brand names such as Tesco, Sainsbury’s, Morrison’s and ASDA let alone the other companies such as B&Q, Wickes, they have missed this key element and continue blindly delivering a poor online customer service.  It is a lesson that the big boys need to learn from as smaller operations that deliver better service, the disruptor companies, chasing their customers.

About the Author – Nigel T Packer

Over the last 20 years Nigel T Packer has been working with companies to understand the tasks, touch points and pathways of their customers to engineer websites that deliver results.

Being at the start of the digital economy, Nigel has adapted and applied the principles of business development to the rapidly changing scene of the internet. With it, the creation of new internet business models that work for his online clients.

An author and digital business speaker his book “How to Get a Website that Works for your Business” has helped hundreds of SME business owners understand the principles of online success.

Today Nigel heads a digital consultancy and training practice PelaTis Online Ltd.  An independent eBusiness consultancy working with retail, manufacturing and service businesses. His insights and understanding of the way the internet works and the direction it is going makes him the go to consultant for online business success.

If you are looking for eBusiness advice and guidance or an eBusiness speaker for your business event…  Get in touch by phoning 01639680248 completing the contact form.



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