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Ocado

Ocado sees profits hit £10.1m for first time – boosted by mobile

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By Jessica Davies, News Editor

February 3, 2015 | 4 min read

Online grocery firm Ocado has reported a hike in pre-tax profits – to £10.1m in 2014 – its first-ever profits since it was established in 2000.

Ocado

The results, in stark contrast to the £3.8m loss the company saw the previous year, saw revenues reach £949m in 2014, up 19.8 per cent from 2013, while group sales surged to £1.03bn

Ocado chief executive Tim Steiner referenced the “intense” competitive backdrop in the supermarket sector, accelerated by the likes of discounters Aldi and Lidl, adding that the online grocery service’s growth had surged “significantly” ahead of the overall market.

He attributed part of the success to the firm’s mobile strategy, having pushed ahead with mobile-enabled shopping to ensure it kept pace with consumers' expectations for multi-device shopping. “We expect this [mobile growth] to continue to be supported by our recent launch of a new mobile website,” he added.

“At the same time, we invested for further growth in UK grocery, non-food and platform opportunities given the attraction of our model in a growing online grocery market.

“Our specialist online pet store, Fetch, is growing at a significant pace, and was joined during the period by Sizzle, our kitchen and dining store.”

Ocado went into business with Morrisons in 2013, which saw the service carry the supermarket chain’s brand from January 2014.

Steiner said: “The successful launch and smooth ramp up of Morrisons.com was particularly encouraging and paves the way for future agreements to commercialise the value of our intellectual property. The development of Ocado Smart Platform, enabled by our IT replatforming and fulfilment solutions projects, positions us well to take advantage of future opportunities as the demand for online grocery shopping increases internationally.”

He described the company’s above-the-line marketing spend as “modest”, with focus on building broader brand awareness around its food offering, sponsorship of Channel 4’s Daily Brunch, and backing the launch of ‘Britain’s Next Top Supplier’ competition, an Ocado initiative to support small British suppliers. It also supplied food to the BBC Good Food Shows at Olympia and the NEC.

“Overall marketing costs, including voucher spend, has fallen as a percentage of sales, reflecting a fall in retention vouchering and a similar growth rate of new customer acquisitions. The Ocado own-label reinforces brand recognition and continues to grow in popularity with sales up over 40 per cent against the equivalent period last year, and the average basket now containing almost five Ocado own-label products.

“The growth in our customer numbers reflects the strengthening position of our brand. Our active customers at the end of the period stood at 453,000 [compared to 385,000 in 2013].

“Our customers’ average baskets stood at £112.25 [a slight drop from £113.53 in 2013] by the period end, including the impact of standalone destination site orders from Fetch and Sizzle.

Steinder expressed confidence in the face of the firercely competetive supermarket sector, describing the online grocery service as "well equipped" to continue to lead the online grocery "revolution", both in the UK and overseas, as increasing numbers of customers "shift away" from traditional forms of retailing.

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