Just this week, the Centre for Retail Research released new findings predicting that the share of online from overall retail sales will rise from 12.7% in 2012 to 21.5% by 2018.
Just this week, the Centre for Retail Research released new findings predicting that the share of online from overall retail sales will rise from 12.7% in 2012 to 21.5% by 2018. The speed of this growth highlights the potential for successful online retail models, such as Ocado, to grow with the demand and effectively replace bricks-and-mortar stores in particular subsectors.
In line with this, Ocado has recently announced plans to launch a pet website, Fetch.co.uk. Although this will be a different website from Ocado, Fetch will trade under the title ‘the pet store from Ocado’. This is just the start, however, with plans to roll out other non-food retail sites including ones for toys, health and beauty products, kitchen, home and garden products. These new sites clearly underline Ocado’s determination to make the transition “from a supermarket to a hypermarket”.
This is a smart move for Ocado, a business that has often been in the press for the wrong reasons due to the fact it hasn’t yet made a pre-tax profit in 11 years. These new sites will be the latest in a variety of strategic moves by Ocado to help further its growth. The etailer recently launched new software, which enables shoppers to transfer their frequent purchases from competitors, such as Tesco, Waitrose, Asda and Sainsbury’s, onto the Ocado site.
What’s more, Ocado’s recent tie up with Morrisons saw its share price soar by nearly 36 per cent after the long-awaited announcement.
There are obvious strategic benefits to Ocado extending its product offering. Many high street retailers have been looking for new ways to bring customers into their stores and enhance the shopping experience. For example, Tesco’s recent decision to buy child-friendly restaurant chain Giraffe showed the grocer’s determination to diversify the business and increase the offering for its customers. Ocado’s latest move is evidence of the growth of diversification online as well as in-store.
From an operations perspective, Ocado will be able to draw on its distribution power to provide the service needed to deliver the new products. What’s more, the etailer already has a trusted and loyal customer base, on which it can capitalise. By using already collated customer data, the online grocer will be able to target shoppers with the specialist website to best suit their buying habits. For example, if a consumer regularly buys cat food from Ocado, they can be directly targeted with Fetch marketing. Ocado will therefore be able to offer shoppers even more convenience - allowing them to carry out their weekly shop as well as having the opportunity to add a whole variety of homeware, pet or beauty products to be delivered along with their groceries.
The company could be on to a real winner by launching non-food offerings. These specialist websites, dubbed “destination stores”, are, in my opinion, what Ocado is all about; leveraging a slick infrastructure to support multi-sector front ends to serve a loyal customer base. You only have to look at the success of Pets at Home to realise that Fetch will be a success and with it, and with it we could just be witnessing the birth of an online conglomerate.
- Dan Coen, director, Zolfo Cooper