Now is the time to ask whether the Ocado model can ever work

In a market of one, it is hard to determine whether Ocado’s model will ever be profitable given that it made a loss for so many years and is now reporting higher losses, mainly as a result of a large investment in new technology.

This is not a criticism of the fulfil from warehouse model as such, particularly as the grocers are now converting some stores into fulfilment warehouses to keep pace with demand that shot up during the pandemic.

But it is worth asking whether a ‘retailer’ with no stores at all will ever achieve the scale it requires to actually make regular profits. After all, the stores grocers are reckoned to be between -15 and -5% on profit fulfilling on line orders, but are prepared to take the loss if it means holding onto and even growing their market share. And grocers like Tesco have the resources to take these losses possibly for longer than Ocado, although Ocado does have the advantage of being a tech play which gives it a lot more rope to play with than players in other sectors.

Part of the problem I have is possibly irrational, the fact that Ocado does not play a part in the wider community that Tesco does, and therefore I have no affection, and therefore no money for it. Quite how any company can build this into its brand equity calculation I do not know, but I do know that when supermarkets come up in conversation as they so often do, Ocado is never part of that conversation. A business that cannot build a place in its customers’ hearts is certain to find it hard to grow.

Customers want to buy in many different ways through many different channels these days now that the single weekly shop per family is dead. Ocado is a one-dimensional experience where shopping with Tesco or Waitrose can be, dare I say it, fun.

This all leads me to include that the future is with the grocers that can trade everywhere, with the store still playing a leading part in its connection to customers.

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