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Online retailer Ocado sees increased order volumes as digital shopping grows

As online retail becomes more popular, Ocado has seen a rise in orders, but its profits for the first half of 2017 have dropped after heavy tech investment

Ocado Group, parent of online retailer Ocado, has reported a rise in its order volumes and an increase in basket size, but its pre-tax profits are down compared with a year ago.

The first half of 2017 saw Ocado record a 15.6% increase in order volumes per week compared with the first half of 2016, as well as an increase in the number of active yearly customers.

But the company’s pre-tax profits have dropped to £7.7m in the first half of 2017, compared with £8.5m in the first half of 2016.

The firm’s recent investment in creating a partnership with an undisclosed European retailer to use its Ocado Smart Platform (OSP) is just one aspect of its focus on technology advancement, and CEO Tim Steiner said its investment in technology must continue to stay ahead of the growing digital shopping trend.

“As the channel shifts to online advances, we continue to gain share in a competitive UK market,” he said. “We expect the trend for grocery shopping online to continue as consumers become more tech savvy and gain confidence in the online services available. Ocado will be a natural beneficiary of that trend thanks to its industry-leading customer offer. We continue to build new facilities in the UK in order to meet the increasing demand we see.

“Meanwhile, we have invested further in our platform and innovation to advance our technological leadership, as we continue to grow our technology and engineering teams.”

Part of Ocado’s efficiency lies in its proprietary physical fulfilment systems at its customer fulfilment centres, which the firm evolves constantly to ensure orders are received, picked and delivered as soon as possible. Its number of weekly “deliveries per van” increased by 2.7% to 180 in the first half of 2017, compared with the same period last year.  

Early this year, Ocado announced it had developed robotic arms for use in its customer fulfilment centres that were capable of working with about 48,000 items in the warehouses, carefully picking groceries for orders.

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Recently, the group’s technology division, Ocado Technology, ran a two-week self-driving van test as part of its quest to automate as much of its online grocery delivery process as possible.

Technology is also being used in other areas of the Ocado Group, with machine learning deployed across customer service teams to improve response times to any complaints made by its more than 600,000 customers.

To support ongoing improvements to these systems, the firm has been growing its technology teams, and now has nearly 1,000 software engineers across five European technology hubs and a 200-strong engineering team for physical tech solutions – all ultimately responsible for improving the customer experience.

These developments will be passed on to Ocado’s partners in the hope of improving their capabilities in online shopping.

As consumers are increasingly shopping online as well as in stores, driving retailers into the omni-channel space, grocery retailers are having to streamline processes to meet consumer demand. Morrisons signed a deal with Ocado in 2016 to expand the areas its online service can deliver to.

Steiner said: “Grocery retailing is changing and we are ideally positioned to enable other retailers to achieve their online aspirations. We expect our recently announced international partnership to be the first of many and look forward to helping more retailers provide a high-quality service to their customers in this rapidly evolving market.”

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