Ocado has carved itself a niche

You can only really get a sense of the scale of the Ocado operation when you walk around its central hub in Hatfield. The picking technology has all been replaced since the operation started nine years ago and it’s impressive to see the orders fill up and get to the vans in time for their delivery.

Ocado - which partners with Waitrose - has come a long way. When it first launched many believed it would never get the penetration it needed because it wasn’t being run by a grocer. It was being run by three former Goldman Sachs bankers - what do they know about food shopping?

The taunts got worse for Ocado when it failed to make a profit. Many called it a charity and some of the traditional grocers refused to see it as a rival.

But Ocado has carved itself a niche. It became the food shopping option of choice for yummy mummies - which in itself is a big market. But then when the tough times came in, it had already set itself up to cope.

The technology in its hub is running efficiently and it no longer has to worry about machinery breaking down and thousands of pounds being spent on a temporary fix. It has also revamped its image to make sure it is more competitive.

With its yummy mummy image, other customers saw Ocado as expensive. It then launched its Tesco Price Match guarantee which meant that shoppers could have the branded products it sells at the same price as Tesco, and also treat themselves with food from Waitrose. For Ocado, it was a win-win situation.

Ocado still has so much more to do. It is not yet profitable at an EBIT level - it is at an EBITDA level - but it is re-investing its cash into future development. There are whispers that Amazon will enter the food market in the UK so Ocado needs to be in the best shape possible to compete, and re-investing its cash should do this.

Competing with the big boys such as Tesco and Sainsbury’s is tough but Ocado should be given the credit for sticking it out and growing its sales. As online sales show no sign of abating, Ocado is in a good position.

And while the traditional grocers all compete on many different levels now with everything from banking to general merchandise, Ocado has an opportunity to become the food specialist of choice.