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Ocado CFO: Tech customers are buying into future innovation

Ocado warehouse fire

The Ocado CFO said that grocery customers such as Kroger are buying into future innovations rather than the company’s current solution, as he discussed the ongoing channel shift in grocery.

Speaking at the FT Future of Retail summit, Duncan Tatton-Brown said that technology customers such as US supermarket giant Kroger had turned to Ocado to access its continuing innovation in the midst of a channel shift in the grocery sector. Kroger, he said, is facing pressure both from Amazon and Walmart, both of which have access to substantial cash.

“Companies like this have built expertise in running large store estates,” he said, adding that they would struggle to “understand how to compete with technology giants or the biggest retailer in the world without quite substantive investment and importantly time.

“Ten times the expenditure doesn’t mean you can do it in a tenth of the time.”

Buying Ocado’s solution for an upfront cost and ongoing fees would allow Kroger to stay abreast of evolution in the sector, specifically in ever-falling delivery times, Tatton-Brown claimed. Giving an example of this, he discussed how the grocer is now using fully robotic picking at the company’s Erith distribution centre, reducing labour costs. He added that until recently the company had just been moving goods to where employees can do this themselves.

In the future, Tatton-Brown said advances in distribution centre technology may allow customers to further customise the products they buy and still receive them in fast turnaround times.

Tatton-Brown also commented on the company’s relationship with M&S, with the joint venture deal completed in August.

Presumably drawing a contrast with former partner Waitrose, the CFO said that with M&S Ocado will have “a partner who is a partner, not just a sourcing arrangement.”

As this is M&S’s only online delivery offering, Tatton-Brown said, the retailer is incentivised to make the partnership work. He said that while M&S’s range is much larger than currently thought, M&S would still have to add new products to its range to make it adequate for Ocado.

Financial figures released this week show the 13 weeks to 1 September saw Ocado retail revenue rise 11.4% year-on-year to £386.3 million.

“Accelerated change”: what would an Ocado-M&S deal mean?

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