Ocado Retail revenue up 27% in H1

Date : 14 July 2020

Simon Mayhew

Head of Online Retail Insight

Ocado's retail revenue grew by 27.2% in the first half (26 weeks ended 31st May), whilst Group revenue (Retail, Solutions and logistics) was £1,086.8m up 23.2%. 

Unprecedented, sustained demand for UK online grocery

Ocado has 639,000 active customers, which is a significant decrease of (14.1)% year-on-year (YoY), as it’s had to prioritise loyal and vulnerable shoppers. These customers are placing larger orders, with the average order size at £137.46, versus £107.65 LY, which is an increase of 28% YoY.

With larger order sizes, Ocado’s mature, (Hatfield, Dordon and Erith) customer fulfilment centres (CFCs) are running at peak volumes, whilst orders per week through Erith CFC are up 60% in the first half. It’s also achieving its best-ever pick rates - 170 items per hour in mature CFCs, versus 159 (LY). However, larger baskets impacted the number of deliveries per van per week, reducing to 175 from 192 last year. Ocado’s wastage levels continue to remain low at only 0.4%. Whilst some bricks and clicks retailers have struggled to manage online and offline demand,  Ocado stated that order accuracy was over 96%, and 97% of orders were delivered on time.

To meet shoppers increasing expectations for faster deliveries, Ocado offers express delivery, within the hour, via Ocado Zoom. It stated that its Ocado Zoom site in West London achieved endgame capacity a year ahead of plan, and a new facility is being built in North London, and its seeking further sites.

Source: Ocado

M&S September launch on track

The preparations for the September switchover from Waitrose to M&S products are in their final stages and reportedly on track. This will include adding initially over 5,000 M&S Food lines with more to follow, which will be available exclusively online at Ocado.com (compared to c4,000 Waitrose lines currently available). Ocado Retail will also stock c1,600 core M&S Clothing & Home lines per year (compared to c250 Waitrose lines).

Source: Ocado

Smart Platform developments

In the first half Ocado opened its first two international CFCs for Groupe Casino, in France, and Sobeys, in Canada.  In the US, Kroger announced three additional CFCs, bringing the total announced so far to nine, and it will build their first mini-CFC in Michigan.

Ocado has worked with Morrisons, in the UK, and Bon Preu, in Catalonia, to increase their online order capacity via manual in-store picking, with current operating levels at over five times those seen at the beginning of March.

Ocado continues to develop its robotic technology to reduce fulfilment costs and now has three robotic pick arms live in Erith CFC. It stated that the pick efficiency of this technology has more than doubled since the beginning of the year.

Ocado Retail profit down but expecting further growth

Ocado Retail EBITDA was £45.7m +87.3%, as it gains from the current crisis. Group EBITDA was £19.8m (35.5)% reflecting increased costs from investment in the International Solutions business.

A permanent redrawing of the landscape

COVID-19 has accelerated the ongoing channel shift to online grocery.

Ocado stated: “in the UK, online penetration has nearly doubled within a few months. In the US, by late June, monthly online grocery sales had reached a level six times what they were in August last year, and in China the major online grocery platforms saw triple digit year-on-year sales growth during the COVID-19 outbreak.

We believe that this channel shift is sustainable, as survey data shows that many consumers who were shopping online during the peak of the pandemic in their respective countries have either continued to do so (56% of those in China), or intend to continue online shopping as ‘lockdown’ measures ease. In the UK, 30% of consumers say they will order more of their groceries this way after the pandemic, whilst 90% of online shoppers in the USA expect to continue grocery shopping this way

The combined revenue of our nine global partners is £210 billion, whilst sales in addressable key markets are £2.8 trillion. In the context of accelerated channel shift, we believe this represents a fee opportunity of £3.5-£26.3 billion, depending on the level of online penetration ultimately achieved”.

CEO Tim Steiner stated,The world as we know it has changed. As a result of COVID-19 we have seen years of growth in the online grocery market condensed into a matter of months; and we won’t be going back. We are confident that accelerated growth in the online channel will continue, leading to a permanent redrawing of the landscape of the grocery industry worldwide.”


For more information on Ocado, read our Ocado Strategic Outlook and to help you prepare for the new normal, read Post-Coronavirus (COVID-19): the longer-term impact and the new normal for ecommerce.