Year-on-year growth down to more customers, says Ocado

Ocado has put its fourth-quarter (Q4) revenue growth in part down to more average orders per week as its customer base increases.

The online retail business, which is a 50/50 joint venture with Marks & Spencer, saw a 0.3% year-on-year increase in revenue during Q4 of 2022, which it claimed to be a result of several factors, including its 940,000 active customers.

This 12.9% year-on-year increase in customers led to a 1.9% increase in average orders per week, with Ocado seeing an average of 382,000 grocery orders from its platform.

Hannah Gibson, Ocado Retail’s CEO, said: "We now have close to one million active customers - our largest ever customer base - and we see huge potential to convert those who have now trialled online shopping elsewhere to become Ocado customers.

“In 2023 we will continue to strengthen and improve our leading customer proposition, including investing in value to help customers manage cost of living pressures, while keeping tight control of our costs. We will also be doing much more to unlock the potential of our partners, combining the benefits of Ocado’s technology with the magic of M&S products.”

Retailers have concerns about the upcoming year, as the cost-of-living crisis has customers saving as much money as possible, exacerbating consumers’ shift in behaviour as pandemic trends begin to ease.

But as well as being a retail business, Ocado has always been at the forefront of technology adoption, testing technologies such as autonomous delivery, 3D printing and robotics, and has several partners using its Ocado Smart Platform (OSP), which is a managed service specific to grocery retailing used in conjunction with purpose-built fulfilment centres.

Its project for increased supply chain efficiency, Ocado Re:Imagined, is also due to roll out this year, which will involve changes to its OSP technology, including new robotics, picking grid and picking site designs.

Ocado’s “biggest ever Christmas” still came with a drop in the average amount of money customers are spending per basket, which Ocado put down to the fact there has been a 7.6% increase in the average prices of basket items, and an 8.3% fall in the average number of items added to the basket compared with the same quarter last year, a trend that was seen in its full year results too.

While the retailer’s full year results found a 3.8% drop in revenue to £2.2bn compared with the previous year, this number is still significantly more than Ocado’s pre-pandemic levels.

Across the year, the financial pinch customers are feeling, as well as a shift away from pandemic purchasing behaviours, was reflected in the average basket size and shopping frequency – average basket volumes in 2022 dropped by 12.1% compared with the year before, with people putting six fewer items in their basket, partly because average selling prices increased by 4.4%.

This means the average value of each basket has dropped by 1.3% across the year, to around £117.

Ocado has been rolling out new customer fulfilment centres (CFC) for the last year, the newest of which is “consistently achieving over 200 units picked per labour hour”.

Over 2022 the retailer was also working on its fast grocery delivery proposition, ending 2022 with four sites open, with more than half of customers using Zoom without having first being Ocado.com customers.