Ocado continues to battle

After writing about the mutual obsession between Ocado and Tesco a couple of weeks ago it seems the former has now turned its attention towards Waitrose, which owns 25 per cent of its business, and supplies it with the majority of its products.

by Glynn Davis

It has been known for some time that the relationship has been strained on occasions especially when the original contract to supply Ocado was coming up for expiry. Although this passed by with a renewal of the arrangement a telling factor was that it is only on the basis of a rolling one-year contract.

The lack of long-term commitment by Waitrose highlights how its strategy has increasingly come into conflict with that of Ocado. Not only is Waitrose now promoting its own delivery service but its continued store expansion programme around the UK reduces the original rationale for its Ocado stake; of giving it exposure to customers where it did not have a store presence.

What has not helped matters is Ocado's ongoing trumpeting of its price matching with Tesco that has resulted in its pricing (for Waitrose products) being cheaper than in Waitrose's stores. As anybody running a multi-channel operation will tell you, there are real problems with running inconsistent pricing across channels, not least the switching of customers from the most expensive to the cheapest channel.

One senior executive at a rival told me this week that Ocado is one of the rarities in the market of being an original dotcom-era business that has proved itself a success. But this success might only be in the sense of it still being around because there is still the question being asked in the food industry about whether its unique dedicated warehouse model has the legs to last the course into real profitability.

Tagged as: viewpoint | ocado | grocery

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