We utilise technology and innovation to drive efficiencies and consequently reduce cost throughout our business. The core design principles that drive efficiency are automation, use of proprietary technology, and aggregation of scale via the use of our large CFCs. By combining these attributes we have been able to develop the most sophisticated and operationally efficient grocery shopping and delivery solutions in the world.

Mature CFCs – Cash Generative and Low Maintenance

Mature CFCs

Mature CFC

Our two mature CFCs in Hatfield and Dordon continue to operate at high levels of accuracy and with improved efficiency (we consider a CFC to be mature if it has been open for 12 months by the start of the half year reporting period). We have engineers constantly on site to ensure these CFCs are well maintained and to improve the resiliency of our operations. Relative to their sales capacity we therefore incur minimal maintenance capex, and we do not expect this to change over the coming years. We calculate that the cash flow return from our mature CFCs each year is nearly 10% of revenue, illustrating the significant cash generation that can be generated once a CFC has scaled and has reached maturity.

Current Mature CFCs(£m)
Revenue*1,350
Operating contribution (c.10%)135
Annual capex(5)
Annual cash generation130
Cash generation as a % of revenue9.6%

* Represents Ocado only proportion of CFCs

New CFCs – High Return on Investment from Better Capital and Operating Efficiencies

CFCs Utilising Proprietary Solutions

Our proprietary technology utilised in our newest CFCs enables us to achieve an attractive return on investment, estimated at over 50% for our Erith CFC, even before any further benefits that should come from other innovations such as robotic picking.

Projected Erith CFC at full capacity*(£m)
Revenue1,080
Operating contribution (11.6%)**125
Invested capex225
Projected ROI>50%

* Assumes 100% utilised by Ocado.

**Improved operating contribution due to higher expected CFC efficiencies and improved delivery efficiencies from increased scale.

Wider Improvements to the Platform

Improvements in Efficiencies across the Retail Operation

Our proprietary technology and infrastructure have been developed in-house and continuously improved over many years to optimise the efficiency of our online businesses. This technology and infrastructure spans the entire shopping and delivery life cycle from customer-facing interfaces, which power our webshop, mobile and tablet applications, to improvements in our UPH efficiency metrics within our CFCs to our optimised delivery routing for the final mile service. Efficiencies within our operations enable us to constantly improve our customer proposition, achieving what we believe to be industry-leading customer service metrics in on-time deliveries and order accuracy.

Mature cfc uph*

* UPH is a four wall efficiency measure, relating to the average units processed per labour hour across all processes within our CFCs

Long-Term Improvement in Drops per Van (DPVs)

All of our delivery routes are optimised in real time using our proprietary software and algorithms. These complex calculations have constantly moving variables based on our customers' choice of delivery slot, house location and current order volumes. By carefully modelling these attributes, alongside the benefit of our continued growth, which is primarily coming from increased demand in our existing catchments so increasing the density of customer orders, we have been able to drive long-term improvements in our DPV, meaning we are continuously improving the efficiency of our assets.

drops per van per week

Drops per van per week

Customer Loyalty

Providing a compelling proposition to consumers is critical to attracting new customers to Ocado and to encourage loyalty and retention for future shops. We constantly analyse and review our offering against the wider market and focus on innovation in order to seek to stay ahead of our peers. Once our customers have learnt to trust the Ocado proposition they become loyal. We can see this in how our customers shop with us over time. Although there is some natural shrink in customers acquired in any given year as people move or family circumstances change, sales per customer group in each year of acquisition are generally consistent or in some years even increasing. This illustrates how much the value of our proposition means to our customers.

Customer Cohort Value over Time

Customer Loyalty

Retail Brand

As we have grown in scale so has the power of our retail brand to deliver value to a wide range of stakeholders. We are continuously analysing and developing our Ocado own-label products, with our typical customer basket now including at least five of our Ocado own branded range. The strength of our brand has seen us winning a number of industry awards throughout the year, on both an individual product scale and wider industry level.

Read more information on Strengthening Our Brands

Ocado firsts

We continuously strive to be a leader in the online grocery space, evidenced by a number of first to market skills and applications to support our proposition. Some significant examples of this are outlined below.

  • First UK supermarket to launch voice-controlled grocery shopping through our Amazon Alexa skill (2017)
  • Trialled the UK's first autonomous driverless grocery deliveries in partnership with Oxbotica (2017)
  • First online grocery application to be released on the Apple Watch (2015)
  • First to launch a fully transactional application on the iPhone (2009)

Read the Developing voice-activated AI capabilities for our consumers case study

Read the UK's first driverless grocery delivery case study

All numbers on this page are reported on a 52 week basis