Ocado (OCDO) CEO Tim Steiner has put the continuing fall in basket size at the online grocer down to food deflation and changes to the way customers order at its pet product and kitchen and dining companies.
In the 12 weeks to 23 February the average number of orders per week rose 18.1% to 183,000 at Ocado, but the average order size fell 2.4% to £114.72. It follows a decline of 1.7% in the fourth quarter from £111.64 to £109.74 and by a similar amount in the preceding three months.
“We started allowing customers to buy Fetch or Sizzle orders separately, which is dragging down the average by about 1%,” Steiner told The Grocer.
“Grocery sales are also down by 1.6%, which is actually just deflation. The basket isn’t changing. Competition has led to a declining gross margin; and the other impact is we are in a global commodity price deflation market.”
He added: “The declines in basket size at the onset of the recession were about economising and less waste. That is not what we are seeing. The average price is cheaper and customers are buying the same amount of goods for less money.”
Ocado posted a 19.2% rise in group sales to £271.1m, including its partnership with Morrisons, for the first quarter this morning, with retail sales up 15.2% to £252m, which was slightly ahead of analyst expectations of 14.5% growth.
Steiner described the growth as “stellar” as it is the maximum it can be at the moment as it waits for its next customer fulfilment centre to become operational.
“In the Morrisons deal, we sold half of the capacity we had built,” he said. “We only have Hatfield and half of Dordon to fulfil orders until our new plant is ready in Andover. So we can’t grow at 20 to 25%.
“Our run rate is £22m/week and we don’t have the capacity to grow any faster, so we are not trying to. We are trying to do 15% and we did 15.2%, so we’re right where we want to be.
“Our business continued to grow, against a backdrop of a retail market that remains challenging and competitive.
“We remain committed to improving the quality of the proposition to customers, which we believe will support further growth. Notwithstanding the uncertainty that remains in the marketplace, we expect to continue growing slightly ahead of the online grocery market.”
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