What is the future for Waitrose without Ocado?

On 1 September we saw the launch of a new partnership between Ocado and M&S, following the end of a 20-year long relationship between the food delivery company and Waitrose.

Waitrose has said that it aims to treble online sales to £1 billion this year, building on the surge in online orders since the start of lockdown, and capitalising on how online retail has accelerated by five years because of the pandemic. But does it really have what it takes to succeed in this space by going it alone?

First, we need to remember how important any brand partnership with Ocado is. Ocado is ultimately an Amazon-esque data company - it knows more about what I want when I shop than I do. It knows how to personalise offers, understand how I shop and what I value. It probably knows the exact age of my children from the products that I buy and how that changes. This is incredible information to hold.

It sells its own-brand products that are cheaper for consumers. So although I’ll opt for the M&S different-flavoured hummus or falafel, I opt for the Ocado cucumber or washing-up liquid. Therefore, M&S doesn’t serve as an alternative but as a complimentary service, as Waitrose did. Just as Amazon replaced Duracell as the largest battery company in the world by offering own-brand alternatives at a cheaper price, Ocado can do this for basic requirements, and it does it well.

Ocado has built a reputation for understanding its customers. Delivery drivers are called ‘customer service agents’ because they act as part of the customer service department. Therefore, a customer service agent greets you at the front door, can advise you on things, can sort any issues and solve problems - including a refund at the touch of a button on the app. In this way, they are very Amazon-esque. The Ocado apps and website work well, it price-matches with Tesco, it rarely has missing items because of its range, and its logistics are excellent.

This partnership is a brilliant move for M&S who have never fully had a food delivery offer before. The timing couldn’t really be better - the rise in online food shopping has accelerated by five years in just a few months and gives them access to a massive database of customers signed up with Ocado and unlikely to want to change.

But what about our loyalty to Waitrose? It previously relied on around 6% of sales through the Ocado service. Aside from a small minority who are likely to remain loyal for the time being, most people understand that what is ultimately changing is simply a brand experience rather than a change in food quality or perhaps even taste. During lockdown, Waitrose fell out of favour with shoppers for low delivery slots and poor digital experience - something it seriously and quickly needs to improve if it wants to stand any chance of being a true competitor.

The website is clunky in all sorts of ways - there’s no joined-up experience between the groceries and wine, for example, so I have two different logins. It follows the design systems of the John Lewis website which works well for clothing and luxury items but less so for groceries and larger shops. The wine selection is fantastic but when I ordered it took seven to eight days to deliver - when short delivery times these days are not just appreciated but expected.

Recently it emerged that it is trialling a partnership with Deliveroo. But what does that mean? First, no-one uses Deliveroo for large, weekly shops so we know it can’t be an alternative to Ocado. Secondly, this isn’t new or innovative - in fact, it’s just another sign of Waitrose scrambling to catch up. Deliveroo users are already used to seeing partnerships with the likes of Co-op and Shell for those ‘last-minute’ purchases. Shell even has great ‘experience’ offers, such as ‘match day bundles’ or ‘movie night’ treats. It would need to ensure its offer was better and more convenient in terms of delivery times and costs for people to choose it. It also now not only has to compete with Ocado but it also has Amazon looming on the horizon with its Amazon Fresh grocery offer, which is now offering all Prime members free delivery.

I worry for Waitrose but it still has potential to really strengthen its position if it acts quickly and smartly. Pricing won’t be its winning strategy but using what it has at its disposal to create more meaning to consumers could be the key. Firstly, understanding that the importance it has always placed on click & collect is no longer in-line with shifted behaviours and now positions them as a step behind rather than a convenient option. Understanding that in order to keep existing customers and entice new ones, especially those who use Ocado, means it needs to incentivise them and spend the time getting to know them in the way that Ocado has. Also, recognising the strength of the John Lewis Partnership and joining the offers to become fuller and more appealing. For example, if someone is buying a set of saucepans on the John Lewis site, they should be seamlessly directed to the Waitrose grocery site and offered free delivery. Cross-selling needs to be key and puts them in a stronger position to both keep existing customers and get new ones through incentivising them accordingly.

Although we’ve seen early teething problems between Ocado and M&S (I’ve seen a couple of ‘buy two for £5’ on £2 items) there’s nothing really to suggest this won’t be a successful and lucrative partnership, strengthening both brands and keeping them in favour with customers. Despite Waitrose claiming they can now deliver to 90% of all UK postcodes, I can’t see the offer being strong enough to convert the majority of Ocado users back over. Therefore, now is the time to show brave action and look to create something that sets a new precedent rather than catching up with the others. John Lewis have just dropped the slogan ‘Never Knowingly Undersold’ - Waitrose needs to be careful not to be left unknowingly out in the cold.

What’s Hot on Essential Retail?