Online sales of groceries at Tesco, Asda, Sainsbury's and Ocado increased 35% to £2.9bn [TNS 52w/e 22 March 2009] to account for 2.3% of overall grocery sales – compared with 1.7% in the previous year – as retailers expanded their coverage across the UK and launched new services and features on their websites.
The fastest-growing online retailer was Asda – albeit from a lower base –with web-based deliveries up 60%, it claimed, as it increased the number of stores offering home delivery by 26 to 161. Asda now covers 93% of the UK, and will add another 15 stores during 2009. It plans to relaunch its home shopping website in June. Second fastest was Ocado, with Sainsbury's third and Tesco the slowest. No figures were available for Waitrose.
Tesco accounts for an estimated half of all online grocery sales in the UK and boasts 300,000 deliveries a week, but sales are understood to have slowed.
The TNS figures were an indication of the massive growth potential of the web, said Ocado finance director Jason Gissing. “Every 20 years a more efficient format for getting groceries into consumers’ homes appears; think high street supermarkets in the 1950s and out-of-town stores in the 1980s,” he said. “Over time about 50% of shopping migrates to the new format because it is more efficient – and therefore cheaper. This is just the beginning of the next evolutionary step in food retailing.”
Last weekend Ocado and Waitrose Deliver appeared to lock horns in the first major clash between the stablemates since John Lewis Partnership transferred its 29% stake in Ocado to its pension fund. Ocado, which has been matching Tesco prices on 5,000 branded lines for the past year, announced it would now be undercutting Waitrose on 4,000 own-label products. A day later, Waitrose announced it would scrap delivery charges, but managing director Mark Price denied this was in response to Ocado, claiming it brought “much-welcomed transparency” to the sector.
“Customers tell us they don’t like delivery charges or short-term gimmicks,” he said. “[If] prices vary depending on the time of day, it’s confusing and penalises some households.” Waitrose Deliver has a £50 minimum spend and is available through 100 of the retailer’s 200 UK branches. It takes about 10,000 orders a week. Ocado’s Gissing played down the pair’s rivalry, insisting they boosted each other’s growth.
“Our year-on-year growth over the past month has been more than 25%, and we expect that to continue increasing,” he said.
Ocado made a profit for the first time in 2008 - but only just. On sales of £435m, the online retailer made EBITDA of £1m, finance director Jason Gissing revealed.
But Gissing admitted pre-tax/EBIT losses continued to mount up last year and he did not expect the company to be EBIT positive during 2009 either.
"We won't make an 'old-fashioned' [EBIT] profit because we are investing in making the service world-class," he said. "But growth is up 25% year-on-year and 30% in the last quarter, and as we gain scale the profits will kick in."
Ocado's accounts for 2008 will be filed with Companies House in September.