Ocado capacity constraints will limit M&S customer adoption, Norman cautions

Demand for online shopping rocketed during the coronavirus lockdown, and Ocado’s business model means that it is unlikely to be able to handle any spike in demand from new M&S customers wanting to shop with the etailer.

Norman said: “Ocado during the crisis has been in huge demand. There’s been any number of Ocado customers increasing their orders and additional people trying to get onto the Ocado delivery circuit.

“As a result – they distribute out of these big CFCs, these robotic warehouses – they’re operating at capacity, so we can’t say how much scope there will be for new M&S customers. It’s likely to be very limited.”

However, Norman and M&S chief executive Steve Rowe remain convinced that their £750m Ocado deal is the right decision and that the rise in demand during the pandemic is evidence of that. They said that capacity will be increased as more fulfilment centres come on stream.

Rowe said: “Progress is good, but it’s going to be the start of the new year when we get extra capacity in the Ocado system.”

He said experience during the crisis showed why Ocado “was absolutely the right investment – this is where the food business is going”.

The health emergency prompted exponential growth of online grocery shopping as consumers sought to avoid stores and have essentials delivered to their homes.

Supermarket groups such as Tesco benefited from their ability to pick from branches to fulfil online demand – an option denied to Ocado because of its pureplay model.

M&S chiefs see the Ocado deal as transformational, enabling the retailer at last to sell food online and ending Ocado’s relationship with rival Waitrose.

Norman and Rowe made their comments at M&S’s AGM last Friday, which was a virtual event believed to be the first of its kind.