Ocado is Focused Online

From the start we have built our business to take advantage of the ongoing channel shift in grocery retailing and our business model exploits the link between retail and digital technology. We are an entirely online-focused operator and strive for new and improved ways to deliver the world's most advanced end-to-end online shopping and delivery solutions.

We innovate to redefine the ways in which people complete their weekly shop. Our strengths lie within our compelling customer proposition, which harnesses our years of learning in a live retail environment to deliver leading customer service metrics, powered by our proprietary technology.

Our business comprises our retail and platform operations, both fundamentally enabled by our technology solutions and IP. By creating virtuous cycles within and between these interlinked businesses, enhanced by continued technology development, we improve our capabilities with the intention of driving long-term shareholder value. Our intention to commercialise our proprietary technology and platform gives us an opportunity to participate internationally as globally customers increasingly shop online.

Ocado's Virtuous Cycle

Virtuous Circle

Retail

Platform

Our objective is to create a virtuous cycle between growth, innovation, efficiency and investment. This is enabled by our end-to-end solution, utilising proprietary technology and removing significant costs incurred by store-based retailers. The resultant cost benefits and profits enable us to reinvest into our business and drive growth. The virtuous cycle drives both our Platform operating model and platform business.

Any improvements we make to our retail operations naturally translate to the Ocado Smart Platform. The investment we make into innovation improves our proposition, both for retail and corporate customers.

Our Platform Operating Model

Our online Platform operating model is designed to deliver a best-in-class service in the most operationally efficient way to drive growth and long-term profitability. We have developed this by applying three core principles – automation, centralisation and the utilisation of our proprietary technology – to our customer focused approach. To achieve this our Platform operating model functions via customer fulfilment centres (CFCs) developed with the constraints and attributes of grocery shopping in mind to reduce or eliminate many of the costs commonly incurred by store-based retailers. Our CFC operations encompass everything from the inbound delivery of goods from suppliers to the final placement of picked and packed customer orders onto vehicles for the final mile of delivery.

By developing our centralised approach, it allows us to maximise efficiency and drive down operating costs, enabling further investment in our customer proposition. We pride ourselves with what we believe to be industry leading service metrics on range, punctuality and accuracy and are constantly looking for ways to advance our proposition further, both for our existing and for new customers.

As an online focused retailer we have the flexibility to expand and grow faster in the market than our bricks and mortar peers. As we improve our proposition we attract a larger and more diverse range of customers, and with this increased scale we benefit from improved efficiencies.

To enhance our retail proposition further, we have extended our range into general merchandise categories. This comprises both products that can be purchased through our Ocado.com hypermarket as well as our specialist destination sites – Fetch, Sizzle and Fabled – which focus on sector-specific segments of the retail market.

Our Platform Operating Model

We have developed a complete end-to-end platform solution for online grocery retail. This has been created through years of operating our own online retail model and we have sought to optimise operational efficiency in every aspect of the online grocery cycle.

We recognise that success within the grocery market requires an understanding of operating within the local retail environment. This understanding includes aspects such as brand knowledge, consumer intelligence and local merchandising agreements. Ocado Smart Platform has been developed as an enabler for a retailer's online business – platform partners will choose how to run their online operations and the best methods to serve their customers, whilst we will provide the vertically integrated software and physical solutions using our online capabilities and experience.

In January 2014 Morrisons became our first customer to adopt our platform offering with the successful launch of Morrisons.com. Since then, Morrisons has extended its partnership with us to enable further growth of its online operations.

Innovation Icon

Innovation

Retail Operating Model

  • We have developed a unique end-to-end technology solution which we believe will have market leading functionality for operating online in the grocery market
  • Our solution is optimised to seek to provide the customer with the best possible retail experience from the user interfaces, the stock and order processing system, through to the final delivery to customers' homes
  • We protect our innovations through patent activity to safeguard our IP for future success

Platform Operating Model

  • We have started to commercialise our capabilities and years of learning derived from our retail experience. The platform we offer comprises an end-to-end software and physical infrastructure solution for corporate customers globally
  • We have embedded flexibility into our platform by developing a store pick module allowing corporate customers flexibility to choose how they wish to service their customers
Efficiency Icon

Efficiency

Retail Operating Model

  • Automation within our infrastructure allows for lower product waste, faster stock turn, fewer human touchpoints and reduced labour requirements
  • Our centralised CFCs utilise significantly less real estate – we do not require the use of regional distribution centres or physical stores as used in conventional store based models
  • Our CFCs use dense storage facilities to make best use of the space and reduce unnecessary transportation time around the warehouse

Platform Operating Model

  • Ocado Smart Platform provides what we believe will be the fastest, most capital efficient, flexible and sustainable method to operate online for corporate retail partners
  • The solution is being continually developed in a "live retail" environment, meaning all innovations created and tested in our own retail operations will also be used to drive efficiencies for our platform customers
Growth Icon

Growth

Retail Operating Model

  • Using cost savings through efficiency gains and underlying profits generated to constantly improve the customer proposition, enhance customer loyalty and deliver continued growth in our UK retail market
  • We offer a superior shopping experience with high order accuracy, minimal substitutions, fresher products due to shorter supply chains, high levels of on time delivery, higher predictability of stock, an extensive range and competitive prices

Platform Operating Model

  • Improvements in our retail proposition will, we hope, drive monetisation opportunities through international platform partnerships
  • Our Ocado Smart Platform solution will enable us to partner with retailers who have established brands, supplier relationships, existing customers and local market knowledge
  • Our solution aligns to the needs of the retailer through its modular and scalable design
Investment Icon

Investment

Retail Operating Model

  • With increasing scale, we benefit from improved efficiencies and expanding margins, which we can use to invest further into our proposition to customers
  • We use the cash generated from our retail operations to invest in further innovations of our technology to drive further growth faster

Platform Operating Model

  • Continued investment in our technology enhances our platform solution, allowing us to provide more efficient and flexible solutions to potential partners
  • We have significantly enhanced our technology and engineering teams to support our retail and Ocado Smart Platform offerings

The Best Platform

Ocado Smart Platform will provide partners with a complete, flexible and scalable solution to initiate or enhance their online presence, powered by our technology at what we believe will be significantly lower cost and a greater efficiency than alternative options.

We design and build the technology solutions that power our retail and platform businesses. This comprises everything from our award-winning websites and mobile apps to delivery route optimisation software, automation and robotics. By internally developing our software and infrastructure it gives us the ability to optimise and integrate across our end-to-end solution and it enables us to collect and use valuable data, for the benefit of our customers.

Pdf