After delivering a record-breaking Christmas on the back of the best part of a year of constant growth, Ocado is riding high. How does it plan to keep up the momentum?
Following the publication of its fourth quarter trading update, Ocado Retail’s chief executive Hannah Gibson had every reason to sound as cheerful as a kid on Christmas morning.
After overseeing a renaissance in performance for Ocado in 2024 – with several straight months as the fastest-growing retailer in the Kantar grocery market share, Gibson guided the pureplay grocer to “another record-breaking Christmas”, putting the cherry on top of a very successful year.
While retail’s Christmas trading updates so far in January have been broadly positive, senior leaders in the industry are still worried – not least by the looming national insurance changes set to come into force in April.
Yet, despite this background mood music, Gibson and Ocado are very positive heading into 2025. Not least because online food delivery now stands at 12% of the total market – its highest point since the lofty heights of the pandemic.
Over the Christmas period, big four giant Tesco reported an 11% increase in online food sales. Marks & Spencer reported an 11.7% jump in online sales – across all categories – representing 34% of total sales.
A rising tide raises all ships. But can Ocado keep this momentum going into the new year, particularly given the gloomy economic forecast?
The future is exciting
When asked whether online food grocery can continue to steal market share from bricks-and-mortar retailers in the UK, Gibson was unequivocally positive.
“I think there are huge steps ahead [for online grocery]. When I look at where our customers are coming from at the moment, we’re seeing continued switching from across multiple different retailers.
“We’re seeing it across consumers, and I think as we continue to improve the proposition, as the service gets better, as the choice gets better and the value improves, then we’ll continue to have a proposition which is ahead of the bricks-and-mortar retailers which will continue to drive channel switching”.
While Gibson wouldn’t put a “silly number” on how big a share online grocery could capture in the future, she said “everything is possible”.
The main driver of Ocado’s growth last year was through new customer acquisition, which jumped 12.1% year on year, which in turn drove up delivery frequency. The retailer achieved this by being highly promotional with new customers – offering 25% off new customers’ first shops and a three-month free smart pass.
In 2025, Gibson said she expected order frequencies to be “stable” this year, “therefore not necessarily a driver of growth going forward”. However, she said the brand would continue its focus “on that active customer base growth” and hinted there were more efficiencies yet to find in terms of the technology that could improve the experience even further, while driving down costs.
To keep the momentum up, Gibson said she expected to continue to “focus on that active base growth” this year but also hinted at finding further efficiencies, price cuts and expanding the range to keep customers happy.
“The online grocer’s focus on price cuts and technological advancements is enhancing customer perceptions of its offerings,”
Aliyah Siddika, GlobalData retail analyst
“Investments in technology, such as robotic arms in their automated Customer Fulfilment Centres, ensure accurate and timely order fulfilment, boosting customer satisfaction and loyalty.”
On the Marks
While the fractious backroom wranglings between Ocado and its retail joint venture partner Marks & Spencer dominated the business pages last year, there’s no doubt that the tie-up is paying off for the online grocer.
While Ocado didn’t break out the performance of M&S products over Christmas or the wider reporting period, Gibson did say getting nearly 100% of the retailer’s adjustable range on its site had “made a huge difference”.
“One of the factors behind [last year] is absolutely M&S. Having nearly the full range on our site makes it easier for Ocado customers to get their favourite M&S products on our website.”
“On top of that, M&S are already winning in terms of the market, and obviously that will have a further impact too. In addition, we’ve been investing in price further across the piece – whether that be branded or our own brand as well.”
However, while M&S products are undoubtedly performing well, Gibson also said the work she and her team has done on price is paying dividends.
Under Gibson, Ocado has launched initiatives such as the ‘Big Price Drops’ and the ‘Ocado Price Promise’ – aimed at matching the discounters on price on certain items.
“This year, we managed to get the price points to where we want them as well. So now for our customers, whether that be choosing what brand of milk or juice or chicken, they know they we will match to Aldi prices.
“We’re also seeing huge growth in terms of the cupboard range and those staples too. So, all the way through our ranges we can offer new, exciting products at competitive prices.”
With M&S going from strength to strength, and ecommerce food delivery back in vogue, Ocado has every reason to expect it can continue to grow into 2025 and beyond.
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