Ocado’s landmark deal with Kroger is testament to the vision of founder Tim Steiner and welcome evidence of the UK’s ability to create world-class digital businesses.
While Amazon and its investors have at times appeared almost to revel in making losses, confident that constant investment would extend its power and consumer appeal, Steiner has until lately been cut little slack.
He faced pretty unrelenting scepticism – including at times, admittedly, from me – about the Ocado business model.
“It’s Ocado’s technological prowess that is its foundation stone – prowess that is increasingly being deployed by established retailers as they seek to bridge the online and offline gap”
As he built the business, many in the City only wanted to know when he’d turn a profit. In contrast to how Amazon was treated, they weren’t so keen on hearing about the need for more investment.
Ocado did make a pre-tax profit for the first time in 2015.
But it has become clear, despite taking a little longer than originally planned, that it’s Ocado’s technological prowess, even more than its etail strength, that is its foundation stone – prowess that is increasingly being deployed by established retailers as they seek to bridge the online and offline gap.
Vote of confidence
The benefits of the Kroger deal, of course, still need to be delivered.
But on paper it looks like a big vote of confidence in Ocado technology, reflected in the fact that Kroger, one of the biggest retailers in the US with annual sales of $122bn, is taking a 5% stake in the British business.
Kroger chief executive Rodney McMullen said the Ocado tie-up would be “an innovative, exciting and transformative partnership”.
It’s tribute to Steiner and Ocado that Kroger turned not to Silicon Valley but to suburban Hertfordshire as it sought to ramp up its digital operations – or perhaps, most probably, to Andover in Hampshire, where Ocado has installed its most up-to-date warehouse technology.
As UK retail readjusts to digitally driven and digitally enhanced shopping habits, it’s important to recognise that it has also created pioneering businesses that may be the future equivalents of the great high street names of the past – etailers such as Asos as well as Ocado.
In this changing landscape then, it is all the more important that as Brexit looms this country does not close its doors to digital talent from overseas – who can help build tomorrow’s great companies – as well as fostering technological skills and expertise at home.
“As UK retail readjusts to digitally driven and digitally enhanced shopping habits, it’s important to recognise that it has also created pioneering businesses that may be the future equivalents of the great high street names of the past”
It’s easy to think that people from the EU and further afield all work in warehouses.
That’s not true, although those that do deserve acknowledgement for keeping goods moving through the retail supply chain.
At many businesses, including retailers, there are staff from overseas who play key roles through skills ranging from AI to automation to the internet of things. They need to feel welcome here.
Along with business rates, ensuring the UK is able to attract and hire people who can contribute to companies’ success should be high on the retail agenda to ensure more in the vein of Asos and Ocado in future.