Ocado is to launch a new 1,000-strong own-label range as it looks to broaden its offer and boost its appeal to Sainsbury’s and Tesco customers.
From today the online retailer is stocking 200 new own-label products, with another 100 to be introduced by the end of the year and more to follow once supplier deals are finalised.
The 35 fresh produce lines developed under the Everyday Selection brand in December 2008 will be incorporated into the range.
Ocado said the mid-tier brand was complementary to Waitrose products and was launched primarily to “fill the gaps” in Waitrose’s budget offer, as Ocado targeted the big weekly family shop as opposed to top-end and top-up shoppers.
“The average basket for Ocado customers is £110. But these shoppers want more choice,” said director Jason Gissing. “We have looked at ‘missed searches’ and ‘not-shopped’ enquiries, and identified gaps in our range that were losing us sales. The new range enables us to compete more effectively with Tesco and Sainsbury’s.”
With Ocado price-matching Tesco on 5,000 brand-based lines, the new own-label range would make equivalent Sainsbury’s own-label products “more of a focus,” Gissing added.
Ocado already stocks more than 21,000 products, with 2,000 of these either exclusive or available in only a limited number of Waitrose stores.
The plan is to increase the total to 23,000 by year-end, with further brands also coming on-stream as Ocado looks to differentiate its offer further.
Waitrose MD Mark Price said he was unconcerned by the new line, and had no plans to add further items to the Waitrose Essential range, which already accounts for almost a fifth of Waitrose sales. “Ocado has a different customer base and has decided to find products to compete with Tesco,” he said.
And Shore Capital analyst Clive Black thought the differentiation from Waitrose was “dangerous”. “The extent to which Ocado can differentiate itself in own label is questionable. This implies more costs and suggests basket sizes will drop.”
Sandra Ziles, head of own brand, also admitted Ocado had faced “challenges” with some big suppliers due to its sales volume order sizes, as well as matching the prices of the big chains. But Gissing said one of the beauties of the model is that Ocado could also be a great test bed for new products and smaller suppliers.
“With a supermarket trial in 10-50 stores, that’s quite a punt. If suppliers come to us we can trial a product and still sell it nationwide. We can be all things to all people, which is one of the reasons why Tesco has been so successful.”
Makeover for Ocado with web relaunch (11 September 2010)
Ocado sales surge but share price slips again (7 September 2010)
There's still plenty of time to enter The Grocer's Own-Label Awards, which recognise the category's best on criteria such as taste, appearance, innovation and value for money. Entries close on 30 October.