The sight of an Ocado purple van delivering orders is a sure sign of a smart neighbourhood.
The online grocer, established in January 2000, knows what its affluent middle-class customers like to eat when choosing healthy options – and when they are treating themselves.
But Ocado Retail’s other key relationship, with Marks & Spencerm, has not always been so happy.
The joint venture between the High Street giant and the supermarket arm of the tech group, a deal struck in September 2020, should have been a match made in heaven.
Instead, M&S was for some time vocal in its criticism of Ocado’s failure to exploit knowledge of its clientele.
Archie Norman, M&S chairman, declared himself to be ‘not happy’ at the 2023 annual meeting.
Delivering the goods: Ocado Retail boss Hannah Gibson (pictured) says the attention surrounding the comeback at their partner M&S, is aiding their own revival
But, as Ocado prepares to celebrate its 25th birthday, the discord is ending, says Hannah Gibson, the chief executive of Ocado Retail.
Attention surrounding the recent comeback of M&S, based on clothing and food, is aiding the revival of Ocado Retail.
As WE tour its Luton hub, Gibson, 41, says Ocado Retail recently hit a record 500,000 orders per week. The trading statement due next Tuesday may reveal that this total grew before Christmas.
Ocado shoppers snapped up M&S clementines, white mulled wine and a ‘build-your-own’ charcuterie board (with cheese and sausage) in the shape of a Christmas tree.
The progress was underlined when M&S chief executive Stuart Machin described sales on the Ocado platform as ‘particularly strong’. ‘The M&S range has definitely supported the Ocado growth,’ he added.
Market insights firm Kantar’s figures show Ocado sales rose 9.6 per cent over the three months to December 29 – outpacing rivals on growth.
Ocado Retail is vying with Sainsbury’s and Tesco, appealing to customers with attractive prices, improved ranges and some quirky additions like chocolate wine.
The range on offer includes M&S food, Ocado own-brand and a large selection of speciality foods.
The robots glide silently around us, connected by a 4G network, busily packing family orders but never bumping into each other, humans or storage boxes thanks to a system of sensors. At Luton, an order of 50 items can be picked and ready in ten minutes.
Thanks to this tech, Ocado Retail boomed during the pandemic and shares in the group which also makes robots for other online grocers, such as the US giant Kroger, reached a high of 2,777p in January 2021.
But when lockdowns ended, shoppers turned to cheaper rivals. The shares are now 279p, down 65 per cent since Christmas 2023, and the lowest since 2017, which was not helped by a 4 per cent fall yesterday.
‘Our customers are saying we are better value than we have ever been,’ insists Gibson.
‘We knew coming out of Covid that we were too expensive. We have taken a lot of actions over the last 18 months to bring prices down.’
For some shoppers Ocado was an indulgence. But now they have switched for their weekly shop.
Competition: Ocado Retail is vying with Sainsbury’s and Tesco, appealing to customers with attractive prices, improved ranges and some quirky additions like chocolate wine
There is evidence that a few customers among the clientele of the German discounters Aldi and Lidl are now choosing Ocado Retail instead.
In September, the firm upgraded its sales guidance to ‘low double-digit’ growth after a ‘strong performance’.
‘As Archie [Norman] said, we are on a path to profitability,’ Gibson explains. ‘That is a mid-term journey and we have been absolutely on track with that this year.
‘When I talk to both of our shareholders about where we are, what we have got ahead, they are both supportive of the direction we are heading in.’
I ask Gibson whether her discussions with both Stuart Machin and Tim Steiner, boss of Ocado Group, resemble a conversation with your parents about whether you have done your homework.
‘I think of it as having one of the best food retailers in the UK on the phone and one of the best technology firms on the phone,’ she says.
‘That’s a pretty privileged position to be in.’
In JULY, Steiner urged disgruntled shareholders to keep the faith as the group narrowed its losses for the half-year.
‘We expect to see a lot of long-term growth,’ he said.
Gibson is diplomatic – a skill perhaps picked up on her politics and economics degree from the University of Cambridge.
But she is brimming with confidence when she talks about grub. A ‘food geek’, Gibson says she loves chatting to her chef counterparts at Ocado and M&S to test recipes.
It is a tough time for retailers, however. Gibson signed a letter sent by the British Retail Consortium in an uproar over the Budget, warning Chancellor Rachel Reeves her tax-raid Budget will weigh heavily on prices and stifle jobs.
‘There are now more pressures than any of us saw a month ago in terms of costs,’ she says. ‘Everyone’s impacted.’
Gibson believes that inflation will be higher than expected a few months ago. This is mostly due to pay pressures, with
the National Living Wage increase representing a £2.73billion hit for retailers.
Many bricks and mortar retailers have warned they will be forced to replace staff with robots to absorb the costs.
Even so, Gibson is adamant the group will continue to create jobs. These will include more drivers – the group already employs hundreds.
As Gibson explains, these workers do not just get food from A to B. ‘Customers say to us: “I’ve literally never had a grumpy Ocado driver, they are always lovely.”’
Gibson will be hoping that more customers discover that they enjoy service with a smile and log on in 2025.
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