Grocery

The loyalty and retention of our customers is a priority within our Retail business as it helps drive growth and capture market share. We aim to provide a best-in-class retail experience by analysing and constantly improving every element of the consumer shop through the quality of our service and our user interfaces, the freshness of our products, the breadth and availability of range, and the competitiveness of our prices.

Progress

In a very competitive grocery market we have seen another year of consistent growth within our Retail business of 12.4%, constrained by capacity utilisation in our mature CFCs. Combined with this we have continued to grow our order volumes by 14.3%, with double digit order growth even in our most highly penetrated catchment areas.

We are constantly looking at ways to reduce friction within the customer experience and during the year we were the first UK grocery retailer to launch a voice-activated AI capability to allow customers an alternative method to add or amend their Ocado order.

For more information on our Alexa skill see the Case Study

Future Focus

Powered by technology, our retail proposition is the heart of our business. We are committed to pushing the boundaries within online shopping and fulfilment to ensure we provide the best proposition to our customers.

The grocery market is changing rapidly and we are constantly analysing and assessing new opportunities within the industry. Be this new food trends, speciality brands or interface features, the agile nature of our business means we are able to react quickly to provide the consumer with what is important and valuable to them.

General Merchandise

Our centralised operating model has enabled us to expand our offering beyond what would typically be found in a supermarket. In conjunction to the general merchandise products sold on our Ocado.com hypermarket we operate three speciality destination sites. These include Fetch, our speciality pet store; Sizzle, our kitchen and dining store; and Fabled, in partnership with Marie Claire, our premium beauty offering.

Progress

We have seen strong growth of our general merchandise division of over 34% over the year, driven by significant growth from our destination sites. General merchandise continues to gain share within our customers' baskets and now accounts for over 7% of our retail revenueA.

During the year our general merchandise division also signed a partnership agreement with Dobbies Garden Centres to provide online services to support the launch and growth of their online operations. Powered by our technological and logistical know-how, it is an agreement that demonstrates the transferable nature of our capabilities into other retail segments outside of grocery. This agreement with Dobbies adds to our partnership to wholesale general merchandise products for Morrisons.

Future Focus

The flexibility of our centralised model allows us to support range extension to other retail categories without significant capital investment and we continue to review other retail segments to identify further opportunities to capitalise on this.

Solutions Business

As we grow and continue to innovate within our Retail business we incorporate our innovations to our Solutions business. Technological advances are tested within a live retail environment on Ocado.com and naturally become part of the platform capabilities which we are able to offer to our current and future partners.

Progress

We are delighted to have signed three international partnerships, with Groupe Casino, Sobeys (signed in early 2018) and a regional European retailer, to utilise our Ocado Smart Platform to help launch and develop their online operations.

We continue to support the significant growth of our first Solutions partner, Morrisons.com, and this year launched the first instance of our store picking functionality with them. Throughout the year we continued to scale operations at our latest CFC in Andover. This is the first instance where our proprietary physical infrastructure solution is in use and provides a live example of the physical equipment platform to which our Solutions customers would have access.

Future Focus

As the channel shift continues across the globe, we believe we are well positioned to act as a market leader within online grocery. The latest deals with Groupe Casino and Sobeys provide major validation of our business model. We expect to do multiple deals in the medium term in a variety of geographies with the momentum of new signings building over time.

KPIS:

263,000

Average orders per week

£107.2

Average order size

645,000

Active customer base

49,000

SKU count (Hypermarket)

3

Number of Ocado Solutions Partnerships signed

Risks:

  • Risk of decline in high service levels
  • Failure to develop retail proposition to appeal to broader customer base and sustain growth rates
  • Failure to develop sufficient management and technology capability or bandwidth to deliver on all our strategic priorities
  • Risk of not signing multiple Ocado Solutions deals in the medium term and not being able to execute effectively
  • Risk of negative implications caused by final Brexit terms such as increase in import costs or difficulty in hiring employees

Primary strategic actions

Improve proposition to customers iconImprove proposition to customers

A priority within our business is to offer a superior proposition to our customers, which we believe is key to driving growth for both our Retail and Solutions businesses. From a retail perspective, we focused on improving each of the core elements of our customer proposition – providing excellent customer service, an extensive range of products, and offering competitive prices.

Our order accuracy and orders delivered on time or early remained at what we believe to be industry-leading levels of 98.8% and 95.0% respectively.

We continue to utilise our technological leadership to enhance the ways in which customers can shop, integrating capabilities such as the Alexa voice-activated interface for Ocado.com to provide our customers with the freedom and flexibility to easily navigate and complete their weekly shop through an even greater variety of devices. Any innovation developed within our retail business will in turn benefit our Solutions partners, who too will have access to these features for their own online operations.

We have seen strong growth within our General Merchandise product sales, including those from our destination sites, which have grown at over 34% year on year, and now contribute over 7% of Ocado retail revenueA.

Strengthen our brands iconStrengthen our brands

Our continued focus on providing a best-in-class proposition to our customers helps reinforce our retail brand. The quality of our service has been recognised across the industry and was evidenced by awards such as Best Organic Online Retailer at the Best of Organic Market Awards 2017.

We have seen robust growth in both our active customer base and total order volumes, which have continued to expand by 11.2% and 14.3% respectively, with the highest number of orders delivered in a week exceeding 296,000 during the period.

Our Ocado Solutions brand has gained significant traction throughout the year having signed our first three international partnerships. The announcement of these agreements has not only provided validity to our model but has helped us build momentum to support the brand for future partnerships to come.

Although not specific business segments, we have been active in promoting the strength and values of our Ocado Technology and Engineering brands. This focus ensures we are able to recruit the best talent to develop the most innovative technology for use within our business.

Case Study

Our Proprietary ʻBotsʼ

Green bot

An essential part of our new proprietary infrastructure solution, which enables growth within our business, is the robotics required to transport products and orders around the hive infrastructure within our new CFCs.

Designed and developed in-house, with the complexities of grocery in mind, these 'bots' are a crucial element within our solution that helps drive the efficiencies required to fulfil groceries online. The bots are required to move across a densely packed grid at a speed of up to 4 metres per second, collaborating with each other to collect groceries stored beneath them and then bring them to a human picker.

A vital element of their success is their ability to communicate with each other so as to avoid collisions and ensure all fulfilment is optimised in real time. Ocado worked with Cambridge Consultants to help develop a proprietary solution that allowed thousands of bots to communicate with each other 10 times a second within a 50 metre radius, a solution believed to be the most densely packed mobile network in the world.

The bots also have the capabilities to transmit information on how they are operating, and are able to self-diagnose if they are overheating or not working properly. This allows them to report back to maintenance to avoid damage and breakdowns upon the grid.

The bots are battery powered. The average energy consumption per robot is only about 200 watts, which is bolstered by regenerative braking. The power pack itself is about the size of a car battery and features a cell chemistry that lets it charge up in less than half an hour and run for several hours.

Through our years of ongoing development and testing we have developed the robotics and infrastructure that can cope with quickly picking and storing goods in a highly dense and scalable manner, ensuring our solutions are flexible for our own as well as our retail partner's fulfilment needs.

At capacity we expect our Andover CFC to house around 1,100 bots of this kind, and at Erith we would expect over 3,500 bots at full scale.

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

See Alternative Performance Measures