These days, in retail it seems the only constant is change. Here are three reasons why the Ocado-Marks & Spencer deal makes sense.
Loyalty to service over brand
The naysayers will argue that dropping the Waitrose range is a sure-fire way to lose customers.
They have a point – naturally, those die-hard Waitrose fans will defect to the retailer’s own site, but my hunch is Ocado shoppers are generally more loyal to the service over the brand. Otherwise, why not choose Waitrose.com in the first place?
“Ocado’s own-label enhancements will help to soften the blow when Waitrose goods disappear from the digital shelf”
Traditional supermarkets may have upped their game, but Ocado still offers a far superior service on all counts: order and delivery accuracy; freshness; one-hour delivery windows; voice shopping; late ordering options. Heck, it will even deliver to your kitchen. Ocado is the white-glove service of grocery and it will take M&S from dinosaur to disruptor.
What’s more, range duplication has become very apparent. The result of Ocado ramping up its own-label assortment as both retailers gradually reduce their dependence on one another. Is there really that much of a difference between an Ocado or Waitrose fairtrade banana? Ocado’s own-label enhancements will help to soften the blow when Waitrose goods disappear from the digital shelf.
Winning the ‘for tonight’ shopping mission
Let’s not forget that food is one of those unique categories in that is a non-discretionary, high-frequency and largely habitual purchase.
We tend to buy the same things from week to week, even more so when shopping online where the convenience of clicking on ‘your favourites’ outweighs the joy of discovering new products at the shelf.
M&S will bring some magic to the virtual shelf, with its expertise in high-quality ready meals allowing Ocado to differentiate from mainstream supermarkets. This aligns with Ocado’s ambition to better cater to the ‘for tonight’ shopping mission, having recently announced plans to launch a one-hour delivery service later this year. ‘Dine in for £10’ just might be back on the menu.
M&S could never do online grocery on its own
Food makes up around half of M&S’ sales and it’s the one category where it has a genuine chance of thriving again. But it had to move into the 21st century. Customer expectations today have gone through the roof; we expect to shop on our own terms. The only grocery retailers that can get away without an online presence are the discounters.
“The deal with Ocado may be a big leap into the uncharted territory but it’s certainly better than standing still”
But delivering perishable food is no easy feat, and even harder when your average transaction size is less than £20. The economics just don’t stack up. How many people do you know that do a full, weekly shop at M&S? With Ocado, M&S will fill gaps in its range (M&S products will only account for 10% of Ocado’s assortment) and finally be able to offer home delivery to shoppers.
Let’s not forget that Ocado and M&S also have a shared enemy in Amazon.
Amazon’s acquisition of Whole Foods Market was a watershed moment for the grocery sector and now the bogeyman of retail is leading to some strange bedfellows. Amazon’s UK grocery market share may be negligible but everyone is choosing sides – or at least attempting to – before it strikes: Sainsburys-Asda, Tesco-Booker. Others like Morrisons and Booths are even opting for Team Amazon.
As M&S chair Archie Norman puts it, it has no “God-given right to exist”. The deal with Ocado may be a big leap into uncharted territory but it’s certainly better than standing still.
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