Ocado boss Tim Steiner believes online will account for 40% of grocery sales in the next 10 years and said it will not be expanding its food business overseas.
Steiner said improvements in connectivity would propel online sales in the future. He said: “I can’t imagine how amazing our devices are going to be in 10 years’ time. It could easily be the single biggest channel.”
Meanwhile, he ruled out taking Ocado overseas and will instead concentrate on rolling out his platform with international retailers.
He insisted that grocery retail was “a regional, not a global business”. He pointed out that big suppliers like Nestle or Proctor and Gamble have a dominant market share in over 200 countries worldwide while the world’s largest grocer Walmart is only present in 30 countries and is not the market leader in all of them.
Steiner, a speaker at the World Retail Congress, said: “Going overseas as Ocado, we would have to find, source and build up buying power and use all advantages in our technology to subsidise that buying power. Whereas, if we team up as a platform provider to an existing grocer, the combined business has far more chance of being massively successful.”
“Even though we effectively end up with less retention of profit than if we owned the business, we make more money as we do it with a greater scale because we have not only the best tech but scale and presence.”
Meanwhile, Steiner refuted Sainsbury’s boss Mike Coupe’s claims that the pace of change in grocery had been extraordinary in the last three to six months and insisted it was not “very dramatic”.
Steiner said: “The change is ongoing. There’s a channel shift to online and there’s a format shift to discounters and convenience. Margins are slightly weaker than a year ago. I don’t think it’s very dramatic.”
“There seems to be more change at the top of these organisations and the change that has been going on for some time seems to be impacting those retailers in a much bigger way than ever before.”
Steiner also said pressure on underperforming supermarkets could further hinder them.
He said: “Those companies are going to face unprecedented change at a much faster pace than they realise because there are outside influences that affect the way you behave when you’re in this form. You start to look at balance sheets and banking facilities.”