Ocado targets £3bn business as sales soar

Online grocer Ocado has recorded a year-on-year sales hike of more than 30 per cent and set out its vision to become a £3bn business in the UK within 10 years.

Ocado, which distributes Waitrose products, generated a like-for -like sales uplift of 42 per cent for the week ending March 29, and co-founder Jason Gissing said the average over the year to date is more than 30 per cent. “The economy is horrible at the moment but our growth is accelerating,” he said.

Gissing expects Ocado to manage sales of about £450m this year, up from just under £400m the previous year. He said Ocado’s year-on-year sales growth went as low as 13 per cent at some points last year so the grocer surveyed customers to find out their views.

“They said we were a bit expensive, they were concerned about the life of the product, and they wanted us to do something about our range,” Gissing said.

Following the survey, Ocado launched its Tesco price-match initiative which covers about 5,000 products, introduced a guarantee which displays the use-by dates of products on the website and receipt, and expanded its range to include goods such as fresh bread, magazines and flowers.

“The response to all our changes has been the uplift in sales,” said Gissing. “We’re confident of continuing to build sales, as online is the biggest area of grocery growth.”

Ocado’s average basket size is about £115, which Gissing said is flat on last year, while “other grocers are seeing lower baskets because their customers are spending less”.

The e-tailer is profitable at an EBITDA level but not at EBIT level. Gissing said that while Ocado “remains loss-making” it “could make a profit within two to three months if we wanted, but we are carrying a lot of costs for our future development”.

Ocado is poised to expand internationally “within the next two years”, likely into a European country first. Gissing said: “We now have a blueprint in the UK which works and just need to find a partner in another country with a brand and proposition which is compelling. Because we have done all the groundwork here, any international business will generate a profit within two to three years.”

The John Lewis Partnership Pension Fund owns a 29 per cent stake in Ocado.