Ocado Retail continues to remain resilient

Ocado Retail has successfully implemented its 'Perfect Execution Plan', sustaining its positive performance in the first half of the year by achieving a 15.5 per cent revenue growth in the third quarter.

Ocado has revised its full year revenue guidance upwards to reflect a projected low double-digit growth, indicating Ocado is a destination for online food & grocery shoppers. However, despite its positive performance, the profit guidance for Ocado Retail has not increased, indicating that it may take some time before Ocado Retail significantly contributes to the overall profitability of the Ocado Group.

Aliyah Siddika, Retail Analyst at GlobalData, says, "The grocer's focus on enhancing its value proposition through initiatives such as the Ocado Price Promise and the recent launch of its sixth round of price cuts under the Big Price Drop has yielded favourable results.

“Amid the growing online food and grocery market, which we anticipate will rise by 6 per cent in 2024, Ocado Retail has demonstrated resilience by maintaining its position as a leading online grocer. Its 'Express It' service, offering same-day delivery slots, was instrumental in driving a notable 14.7% increase in average weekly orders.

"Ocado Retail has remained competitive amidst the growing popularity of Tesco's 'Whoosh' same-day delivery initiative and rapid-delivery services like Deliveroo and UberEats encroaching upon the grocery market by delivering groceries from convenience stores and supermarkets alike. The online grocer's implementation of targeted promotional discounts, such as offering 25% off on the first purchase, has also proven effective in attracting new customers. Ocado Retail has surpassed the milestone of one million active customers, indicating a significant increase in its market appeal within the UK.

“Yet, the average basket value at Ocado Retail has shown a lack of growth compared to other key performance indicators this period, with a modest increase of 0.2 per cent in the third quarter. As consumers focus on value for money, the grocer must encourage customers to trade up to more premium products.

"Ocado's current product range lacks sufficient innovation, especially compared to competitors like Waitrose, which has successfully collaborated with renowned brands such as Ottolenghi and health brand Zoe to offer unique products at higher prices. Ocado must follow suit to strike the right balance between its value proposition and premium quality.”