Different to other food retail majors, Ocado has focused on the online business. In 2014, the company showed a profit for the first time and is now also offering its hardware and software to international partners. Pro Carton has followed the developments in e-commerce from the beginning and taken a closer look at the strategy of the world’s most innovative retailer in the foods business.
Online food retailing attained its first level of technical and commercial maturity in 2014. For the first time, Ocado showed a profit of nearly ten million euros and a good positive outlook, expecting the UK online grocery market to double in the next five years to 8.3 % of total UK grocery sales.
1. Shopping Experience
Customers adapt new ways of shopping if they consider it more attractive to do so. There are two primary points of interaction with them – at the time of ordering on the customer interface and at the point of delivery. Ocado seeks to provide the best possible experience for its customers at both of these points.
Presently, the company does well among the young, stressed urban population who have neither the time nor the interest to shop in supermarkets. Convenience is trumps at the moment. But CEO Tim Steiner is aware: “It is important to note that consumers who wish to shop online also pay great attention to product quality, freshness, availability, range and the reliability of the service provided – all of which we continue to focus on delivering to the highest standard.”
2. Vertical Integration
Ocado claims to be the world’s largest dedicated online grocery retailer. Ocado does not have supermarket outlets, and has focused on developing the best platform for online grocery retailing as well as the market leading logistics and physical infrastructure solutions. It says it is better equipped than its competitors: “Our peers’ use of existing assets (shops) or smaller warehouse-facilities (so called dark stores) does not afford them the same benefits”, states Steiner.
3. New Channels
Ocado has extended the selection into many general merchandise categories – for example pets, kitchenware, babies, the home, health and beauty products and gift items. Expansion of distribution channels into the non-food business started in 2013 with the pet platform “Fetch”. The customer survey data had shown that over half of Ocado’s customers own a pet, but only 20 % bought pet products from Ocado, the main obstacles being the lack of range, brands and awareness. The next step followed in 2014 by expanding distribution to the new household goods line “Sizzle”.
4. Global Search for Partners
The search for partners has also borne fruit. 2013 saw the successful cooperation with a UK retail chain: Morrisons is the first strategic customer, to be followed by others, mainly at an international level.
Tim Steiner: “We continue to receive interest from a broad group of potential international partners to discuss how we might assist them in introducing or improving online business in their own markets. We are targeting to sign the first such agreement during 2015 although there is no guarantee we can meet this timeline.”
5. Innovative cooperation
A new distribution concept in cooperation with the magazine is highly innovative. A web shop under the name of the women’s magazine will offer beauty products. This business will be a separately incorporated company and will operate using the Marie Claire brand. It will be led by Amanda Scott, currently Head of Buying for Beauty and Accessories at “John Lewis” stores.
Marie Claire publishing director Justine Southall: “This launch will be the perfect combination of content provider, consumer and commerce. Marie Claire’s brand authority, Amanda’s talent and the world-leading technology, logistics and ecommerce expertise of Ocado means I couldn’t be more excited about the potential of this launch.”
The greater the number of new distribution options, the more important packaging becomes. In the previous year, a Pro Carton study surveyed what types of packaging the trade was looking for in multi-channel distribution.
The study showed that packaging is becoming the central brand messenger in a number of new marketing and logistics models, both for images in the online shop and the shelf, as well as in the homes of consumers.
Cartonboard has clearly demonstrated its role as the packaging material of the future: it offers excellent visualization on the web shop, it is best suited to meet the overall logistic requirements and because it offers sustainability all inclusive.
Study: “Multi-channel: requirements, trends and potentials for product packaging in E-Commerce“
Presentations ECMA Pro Carton Congress 2014:
Programme of the Congress
Marco Atzberger: Pro Carton Study: Multi Channel Retailing
Lisa Byfield-Green: Winning Online – European Multichannel
David Hughes: Global Food and Drink Industry Trends
Philipp Riederle: Digital natives, the new customers
David Swift: Big Pharma – an industry in a state of flux