Ocado boss predicts UK ultra-fast grocery delivery will stay small

imageStock Markets43 minutes ago (Jul 06, 2021 11:08AM ET)

(C) Reuters. FILE PHOTO: An Ocado delivery van is seen driving in Hatfield, Britain February 26, 2021. REUTERS/Matthew Childs


LONDON (Reuters) – Rapid delivery grocery firms will only ever account for a small chunk of Britain’s overall food market as the bulk of consumers will always prefer the lower prices and larger ranges offered by bigger retailers, Ocado (LON:OCDO) boss Tim Steiner said.

The country’s grocery sector faces a new threat from companies like Weezy, Getir, Dija, and Gorillas who offer an ultra-fast service, supplying groceries via apps in as little as 15 minutes.

But British online grocer and technology group Ocado said the new entrants posed much more of a danger to neighbourhood corner shops than online supermarket sales, such as Ocado’s online-only grocery joint venture with Marks & Spencer (OTC:MAKSY).

Traditional online grocery shopping, where people book delivery slots days in advance would continue to underpin the market.

“The channel shift is going to move to the big warehouses because they are the format that offers customers the lowest price and the largest range, and the freshest food, and customers have always migrated to those factors,” Steiner told reporters on Tuesday.

Speaking after Ocado reported a 20% rise in first-half retail revenue, he said there was a market for immediate grocery delivery, but that market is small, and the market for deliveries within 15 minutes even smaller.

Ocado is rolling out its Ocado Zoom service which offers deliveries within an hour, while Sainsbury’s “Chop Chop” service guarantees the delivery of up to 20 items in 60 minutes.

Other supermarkets, including market leader Tesco (OTC:TSCDY) and Asda, are also trialing rapid delivery options.

Morrisons, Aldi and Waitrose also use app Deliveroo as a platform for quick delivery.

Currently online shops account for about 14% of Britain’s overall grocery market. Steiner said short-term needs probably account for 5% of that overall market and he suggested ultra-fast delivery could address 14% of that 5% short-term segment.

The more immediate the delivery, the more expensive the service and the narrower the range of products, he said, adding that people might be willing to spend a bit more on the occasional immediate top-up but that is as far as it will go.

He also noted that the rapid delivery sector would only ever be able to serve densely-populated urban areas.

Ocado boss predicts UK ultra-fast grocery delivery will stay small

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