Online grocer Ocado is trialling its first physical offer through lockers at its head office before it expands the initiative to external locations, Retail Week can reveal.
Ocado chief executive Tim Steiner told Retail Week there’s a “place in the market” for a physical offer.
Steiner said: “We’ve been experimenting with physical pick up. We’ve run initial experiments with locker boxes and collection points on our own premises. We’ll run [the lockers] on external premises soon.”
Steiner did not disclose any detail on where the lockers will be located. Rivals Tesco and Asda have rolled out lockers to locations including London Underground stations in a bid to expand their multichannel offer and improve convenience.
The move comes as Ocado revealed rising sales and profits in its first half. Despite the robust performance, Steiner said the market was “very, very competitive”.
He said some grocers were launching “irrational” amounts of marketing as they come under pressure to grow sales. “The level of activity in terms of promotions and media is at an all time high,” he added.
Steiner said that despite it selling more premium good online, Ocado is not isolated from the threat of the discounters. “I don’t think anyone is protected from a growing participant in the market,” he said.
Sales in the second quarter slowed from the first, and basket size was flat in the first half. Steiner said there had been “some volatility in sales growth” and that the consumer trend away from high sugar content goods such as fruit juice had hit growth. “There’s been a noticeable fall in juice, it’s having an impact on overall basket size. Juice is a category under pressure, not just at Ocado,” he said.
But he added Ocado was still growing ahead of the market, and that sales across rivals’ physical stores had delivered “appalling sales growth” in recent months, while online had only “suffered slightly” in the tough market. “We remain confident we’ll out grow the market,” said Steiner.
Ocado revealed it is to open a further customer fulfilment centre in Andover, which Steiner said is smaller and will be more profitably run that its existing site in Dordon. Steiner said: “This shows we can build one that’s smaller with better operating economics. It’s the first one of we hope many.”
Steiner said it could form a blueprint for future CFCs and also aid with its potential roll-out of its platform to overseas retailers.
Steiner said Ocado has been in talks with “40 or 50” international retailers about launching an online grocery offer for them, after it partnered with Morrisons to launch its ecommerce offer earlier this year.
Steiner said: “They believe there’s a requirement to deliver [groceries] in their countries. We can use our platform to help them, and will charge them in a different way, on a use basis.” Steiner declined to say who he had been in talks with or when any deal may be finalised.
He added the Morrisons launch had gone “very well” from an Ocado perspective.
The retailer is also poised to widen its reach in non-food with the launch of its specialist kitchen and homewares online shop Sizzle. It will have more than 12,000 SKUs – more lines than Ocado had when it was first launched, said Steiner. Sizzle will follow Fetch, Ocado’s online pet shop that launched eight weeks ago.