We seek to do this by driving growth, maximising efficiency and utilising our proprietary knowledge.

Strategic objectives

Driving growth

Grocery

In the online arena it is critical to ensure a positive customer experience as the cost and ease of switching between retailers is low. At Ocado, we have focused on improving every element of the consumer shop through the quality of our service and our user interfaces, the freshness of our products, the breadth and availability of our range, and the competitiveness of our prices. This drives customer retention and helps us capture market share. 

General Merchandise

Our centralised operating model has enabled us to expand our offering into general merchandise categories. As well as general merchandise sold on Ocado.com, we have dedicated destination sites which focus on specialist product ranges, such as our pet store, Fetch, our kitchen and dining store, Sizzle and our new premium beauty offering, Fabled - in partnership with Marie Claire. 

Platform Business

Continuous innovation and investment in our integrated software and physical infrastructure solutions drives a virtuous cycle of growth in both our retail and platform businesses. Our future platform customers will benefit from years of learning and development in a live retail environment to enable a sustainable launch or improvement to their online operations. 

Maximising efficiency

Operational Efficiency

Our proprietary technology and infrastructure have been developed in-house over many years for the sole purpose of running and optimising the efficiency of our online business. 

This spans the entire shopping and delivery life cycle including: 

  • Customer facing interfaces which power our webshop, mobile and tablet applications
  • Receiving, putting away and managing stock
  • Picking and organising customer orders
  • Loading delivery vehicles
  • Optimised delivery routing for the final mile service

The core design principles that drive efficiency throughout our business are:

  • Automation
  • Utilising proprietary technology
  • Aggregation of scale via the use of our large Customer Fulfilment Centres (CFCs)

Amongst a range of benefits, these optimisations give us perfect stock control; high productivity; the lowest inventory and product waste levels in the industry, and a smaller van fleet than would be needed to serve a comparably-sized store or dark store.

Fulfilment assets

We operate what we believe to be the world’s two largest, most sophisticated single-pick grocery stores: CFC Hatfield and CFC Dordon. At the end of 2016 we commenced operations in our latest CFC in Andover, Hampshire. This site houses the first implementation of our new, internally developed, integrated MHE and associated software. At maturity, the solution will be capable of driving significant productivity and fulfilment benefits in a highly modular and flexible fashion, and we expect it will increase our fulfilment capacity by around 65,000 orders per week, or approximately £350 million in sales value. All of our CFCs are designed and built to handle the unique challenges that exist in picking groceries with speed, accuracy and efficiency, including:

  • Picking a basket of 50+ items
  • Picking across three different temperature zones (ambient, chilled, frozen)
  • Coordinating multiple orders to go onto a delivery vehicle in a short time window
  • Enhance efficiency of future capacity and drive scale benefits
Non-food and spokes

We constantly plan for growth, and invest in appropriate fulfilment assets, such as our delivery spokes, and our dedicated non-food warehouse which opened in January 2013.

Capital Efficiency

Future Customer Fulfilment Centres (CFCs) – improving capital efficiency

As mentioned above we commenced operations in our Andover CFC at the end of 2016, which houses our new proprietary MHE solution. Our solution is modular (can be built to different sizes), scalable (can be increased in size) and we expect future iterations to be faster to deploy (shorter build and commissioning lead times) allowing for reduced up front capital commitment. 

We have also been developing our largest and, what we believe to be, most capital efficient warehouse in Erith, South London since early 2015 and we expect first orders from this CFC to initiate in financial year 2018. Like Andover, this CFC will utilise both our proprietary software and physical solutions and we expect it will be capable of handling over 200,000 orders per week, equivalent to around £1.2 billion of sales when operating at full capacity. 

Leveraging scale

As we grow, we can allocate administration and fixed costs more efficiently; our gross margins improve, as does the efficiency of our delivery operations.

Utilising our knowledge

Our proprietary IP, knowledge and technology is at the core of our business. It supports our market leading proposition to customers and drives our operating efficiencies. We seek to continually improve the technology we use and believe that this innovation creates competitive advantages across our business.

As with any valuable platform, there is an opportunity to apply this intellectual property to other situations and markets. In May 2013, we announced the first commercialisation of our intellectual property, in an agreement with grocery retailer Morrisons in the UK and we believe that further agreements will be a significant source of value in the future. We intend to extend our reach internationally through partnerships using our proprietary Ocado Smart Platform solution.