Covid-19: Ocado predicts demand will “unwind”

While the retail industry reels from the ongoing effects of Covid-19, Ocado is standing out from the crowd with unprecedented demand for its online service that has forced it to stop taking any new orders until Saturday.

However, as part of a planned trading statement Melanie Smith, CEO of Ocado Retail, stated the massive demand for products as a result of the virus which has seen sales in the second quarter so far double those seen in the first quarter, is expected to “unwind at some point”.

As a result, she said the guidance on performance for the full year 2020 is being kept unchanged at the existing 10-15% growth in sales. Ocado said: “We assume there to have been a large element of forward buying of ambient items and there may be further disruptions ahead."

For the 13 weeks to 1 March 2020, Ocado revealed retail revenue growth of 10.3% as sales hit £441.2 million for the period helped by average orders per week increasing 10.2%. However, average order sizes remained largely static at a healthy £110.24.

Despite having to temporarily stop taking orders, Smith said Ocado takes great confidence in the strong fundamentals in its business model and that preparations for the switchover from its supply deal with Waitrose to Marks & Spencer were “on track”.

Guy Elliot, senior industry lead of retail at digital consultancy Publicis Sapient, echoed this positivity but cautioned: “In order to capitalise Ocado is going to have to update its technology infrastructure and adapt business processes to win the confidence of the consumer, not least those segments who have been late adopters of online shopping.”

He suggested: improved order transparency; proactive communication on out of stock or low supply products; more seamless integration across online and mobile ordering; better supply chain visibility and predictability; and expanded fulfilment options will all be crucial.

“For now, it’s all eyes on Ocado to see if they can maintain their strong reputation during and post crisis. Future numbers depend on it,” said Elliot.