Online secret shopper: Can Ocado avoid becoming the Betamax of online grocery?

Originally one of the first movers within the online grocery market, Ocado’s recent performance – or more to the point, lack of the long-promised international licensing deal – underwhelmed analysts.

With UK retail sales dropping sharply with inflation hitting consumers in the first quarter of the year, people are starting to ask if this spells trouble for Ocado.

The UK’s online grocery market looks to be plateauing, with growth slowing from 13% in 2015 to just 7% in 2016.

As the market starts to slow, so Ocado continues to struggle to match the scale and breadth of the big four supermarkets: its average order size dipped by 1.6% to £110.84 in the first quarter of 2017.

Combine this with the threat from new entrants to the online grocery market such as Amazon and the planned entry of at least one of the major discounters, and things don’t look good.

At least that’s what the market thought as Ocado’s shares dropped to an eight-month low last month, although it has been gradually climbing since then. 

Ocado’s management are still investing, and as they near completion of a flagship distribution centre in Kent, are there things they can do to shore up earnings in the short term?

1. Good stores are upfront about delivery

If you took your basket to the checkout of Tesco and they told you they couldn’t complete your transaction, you’d be pretty mad.

Well, this is a standard customer experience if you shop with Ocado for the first time without knowing if they deliver to your door. Having filled in a form and then a basket, only then are you asked for your postcode.

While management might argue it’s a sale they were never going to make, one could say that it’s a permanent customer loss to the brand – even if distribution were extended or the potential customer moved into a serviced area.

“Pity the new Ocado customer: even if it does deliver to your street, there is no shopping, let alone a transaction, until you have completed a form that wouldn’t disgrace the Passport Office”

If an online store has areas to which it does not deliver, this needs to be presented to the customer prior to their interaction with the site.

Key competitors Waitrose and Wholefoods both use this approach to help customers self-select out of their online stores quickly.

Pity the new Ocado customer: even if it does deliver to your street, there is no shopping, let alone a transaction, until you have completed a form that wouldn’t disgrace the Passport Office.

Ocado does not offer a guest checkout option: in comparison, Fortnum and Mason, another high-end shopping experience, offers customers the opportunity to check out without signing up.

Ocado could be losing potential customers to whom it could deliver at the top end of its funnel.

2. Convenience is the main driver of online shopping

A study by Savvy in 2015 found that convenience, rather than price, is the main driver of online grocery shopping.

For the consumer, convenience represents making their journey through the website such that they find all their required items as quickly and simply as possible.

Given that findability is the priority here, the search function needs to be easily accessible.

The search function on the Ocado homepage is not clearly located and is instead cramped within the navigation bar.

A blur test (below) highlights how the search box disappears into the banner, which suggests that it isn’t that visible for a new customer to the site.

In contrast, Fortnum and Mason has a clear search bar positioned on the far-right-hand side of the page, which performs far better when blurred.

Search isn’t the only problem.

Navigation can be challenging too, as instead of Ocado’s banner presenting the general grocery categories across the page like the majority of the big five online stores, it employs a drop-down menu which can only be accessed when the user clicks on ‘Browse Shop’.

3. A clear layout means a confident customer

Ocado’s default trolley layout makes it difficult to identify the individual cost of each item within the trolley, relying solely on images to represent the items chosen.

Furthermore, the total cost of the items chosen is not in an engaging position, and instead of being located next to the products in the trolley it is instead placed within the navigation banner.

In comparison, Waitrose has ensured that its trolley layout includes images, prices and the opportunity to add or amend the items already chosen, and the total cost is close to the products.

Interestingly, Ocado does offer its customers the option to view their basket in a text format – this incorporates the necessary requirements for a sufficient basket without the images, i.e. the individual price of each item.

However, the question here is should ‘text’ be the Ocado default trolley layout instead of ‘pictures’?

4. Ocado checkout hell

New checkout research has found that, on average, online shopping cart abandonment in the US is 68.8%, while 27% of online shoppers have abandoned an order in the past quarter solely due to a too long and complicated checkout process.

Checkout processes, therefore, must be as simple to navigate as possible.

There is not a clear call to action to ‘Checkout’ in the Ocado execution.

“The checkout process for Ocado is long-winded and complex to navigate. It requires the customer to engage with 10 pages from pressing the ‘Checkout’ button to transaction completion”

The button itself is not clickable unless you have at least £40 worth of groceries selected, and the font explaining you cannot checkout until you have reached the minimum spend is hardly visible on the page and easy to miss.

In addition, within Ocado’s top banner sits the three buttons that you would expect to link through to the checkout phase: ‘View trolley’, ‘Book a delivery’ and ‘Checkout’. However, it is only the ‘Checkout’ button which takes you into the funnel.

The checkout process for Ocado is long-winded and complex to navigate. It requires the customer to engage with 10 pages from pressing the ‘Checkout’ button to transaction completion.

This is lengthy in comparison to the approach adopted by Fortnum and Mason, which has only five stages.

And the conclusion?

Online grocery operates on wafer-thin margins; and to hold off the competitors and the entry of Amazon, Ocado needs to offer a stand-out experience. If it doesn’t work on this, Ocado will find it a harder and harder battle to win.