Past meets the future

The partnership between the new kid on the block and the traditional face of British retailing show just how important it is to keep innovating – as M&S have found, sooner or later the old ways start to show their age.

Scratch the surface of Ocado’s business model and you’ll find all the characteristics of a tech company that just happens to be involved in getting the weekly shop to your door. Their customer fulfilment centres incorporate gaming technology to visualise warehouses in 3D, allowing analysts to spot problems like traffic jams before they happen, and their work in robotic order fulfilment is a sight to behold – have a look online.

Without any superstores to take care of, the company has been able to leapfrog issues like underperforming sites and skip straight to a nimble online offering.

A key element to all of this is that the software powering the whole operation is written in-house. This is where Ocado sees the opportunity.

Grocer growth

It’s one thing for traditional retailers to have a fleet of home delivery vans backing up orders on a website but when it comes to delving into smart warehouses using machine learning and artificial intelligence they may need to go shopping themselves. This is where M&S finds itself today, having neglected its own delivery capabilities – but it isn’t alone.

A significant number of online retailers still do not have adequate online portals and Ocado hopes it will be quicker and easier for supermarkets to buy their technology and warehouse expertise rather than try to develop it themselves.

And even if the more established players downed tools and looked at creating such a system, it’s unlikely they would catch Ocado, which opened its latest customer fulfilment centre in 2018, designed to be the largest automated warehouse for online grocery retail in the world.

With the tech roll-out firmly at the forefront of the company’s intentions, it’s unlikely this is the last we’ll hear of deals with big retailers. And the ones who already incorporate Ocado’s technology might just have to deal with it, or invent their own.

More on Ocado

Five year performance

(%) As at 14 Sept

2015-2016 2016-2017 2017-2018 2018-2019 2019-2020
Ocado -18.7 16.1 206.7 47.6 74.4

Past performance is not a reliable indicator of future returns

Source: FE, total returns as at 14.9.20, in GBP terms

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Topics covered

UK, Shares



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