Tuesday, 22 September 2015

Mixed Fortunes in Online – Waitrose down, Ocado static and Morrisons struggle with profit

The online conundrum continues. No one seems to have worked out how to find the holy grail of growth in both sales and profits.

Waitrose, purveyors of food to the well heeled, surprised market watchers last week with the news that their total like for like sales dropped by 1.3% in the last 6 months, the first decline in over 6 years. Even more surprising was the news that online sales plummeted by 13% due it seems to pulling out of promotional activity.

Ocado, equally upmarket, and an online only business, announced by contrast that its sales had grown by 15.3% in the last three months, roughly the same rate as in previous quarters.  Amount spent per order continues to drop.

Morrisons, who were late into online and partnered with Ocado to get going, did not declare sales, but CEO David Potts hinted at profitability problems, saying about the tie up with Ocado “ Its very important that it does become profitable growth. At the moment it is best expressed as an internet investment.”

Running an online operation appears to be a drain on both retailer and manufacturer profitability.

The Institute of Grocery Distribution just a week before the above results were announced published an article entitled “Five killerquestions to ask when moving online”. The third question, “can you invest for growth?”, resulted from  IGD’s finding that many manufacturers, even larger ones, are still mastering the basics of online retailing, and need to spend more money on developing their online offer, particularly in understanding shopper behaviour.

Operating in online grocery shopping does seem to come at a heavy financial cost.