Tough competition in online market sees order sizes drop at Ocado

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ONLINE grocer Ocado reported a fall in average order sizes as competition heats up

The firm described the retail environment as challenging although it expects to grow in line with, or slightly better than, the rest of the online market.

Ocado, which struck a £200m deal with Bradford-based Morrisons to provide its online grocery operation, said the service that was launched in January is scaling successfully as demand increases.

The group said retail sales rose 15.5 per cent in its fiscal third quarter.

Gross sales rose to £218.5m in the 12 weeks to August 10, compared with a rise of 15.6 per cent in the first half, while average order size fell 1.7 per cent to £111.64.

“We are pleased with the continued steady growth of our business despite the increasingly competitive nature of the market,” said chief executive Tim Steiner.

Market leader Tesco cut the delivery price for its online grocery orders this year.

“The retail environment is challenging with an increased level of promotional activity and price reductions across the industry,” Mr Steiner said.

Britain’s online grocery market is growing at around 15 per cent a year, far outpacing the broader market, and while it still accounts for only about five per cent of total grocery sales, industry group IGD sees it more than doubling in value over the next five years to £17bn.

Ocado, whose range includes products supplied by upmarket grocer Waitrose, has not made an annual pre-tax profit since it was founded in 2000 but analysts are forecasting one for its 2013-14 financial year.