Proprietary Knowledge

Utilising Proprietary Knowledge

Our Intellectual Property

Our proprietary IP, knowledge and technology is at the core of our business. It supports our market leading proposition to customers and drives our operating efficiencies. We seek to continually improve the technology we use and believe that innovation creates competitive advantages across our business.

The key to success of our IP is that we have focused on developing optimal solutions solely for online grocery retail – and have been able to refine and test our solutions in a live retail environment. Practically, this means we have tackled traditional challenges associated with grocery baskets such as large order volumes, goods spanning three different temperature zones and narrow one-hour delivery slots. Our capabilities span our proprietary processes, physical infrastructure solutions, systems and software to provide a complete end-to-end solution.

Progress

To ensure rapid innovation and advancement of our intellectual property and to maintain technological leadership we continue to invest in both our Ocado Technology (currently over 950 people) and engineering development teams (over 200 qualified engineers). Our largest technology development centre is in the UK, but we also have two in Poland and one in each of Bulgaria and Spain helping to build our reputation as a global technology leader, attracting quality talent to underpin our technology expertise.

By creating these capabilities internally we can ensure that our solutions are continually updated and integrated without having to liaise and co-ordinate lengthly change processes with multiple third party providers. This allows us both the flexibility to innovate at a rapid pace and also the continual evolution of our solutions with the intention of creating long-term shareholder value.

Throughout the year we have focused on development and deployment of our physical infrastructure solution and associated software platform. The first live instance of this infrastructure is in our Andover CFC and we expect it to highlight significant capital and operational efficiency advantages, demonstrating the power of our capabilities to our future platform partners.

In August 2016, we announced the extension of our agreement with Morrisons to provide the infrastructure, host and support for their online operations (see Morrisons case study below). The growth of Morrisons.com, which has driven the contract extension, highlights the advantages and competitiveness of our technology solutions. The renewed agreement is now more aligned to how we would structure future Ocado Smart Platform deals and illustrates the flexibility of our offering, allowing future partners much lower entry points for capacity commitments.

Future Focus

We are committed to invest in our solutions to drive growth and innovation in our retail and platform businesses with the intention of creating long-term shareholder value. We continue to advance our conversations with multiple potential platform partners and are confident of signing multiple deals in multiple territories in the medium-term to capitalise on our knowledge.

Patents

In order to retain our competitive advantage from our technology innovations we take careful measures to protect our intellectual property and inventions and file multiple patent applications to safeguard this.

Our patent activities are intended to create a web of protection for our intellectual property.

Progress

As at the end of the period, we had filed patent applications covering over 50 separate innovations. Of the patent applications filed so far the majority relate to our physical infrastructure solution, which is now live in Andover. Our first patents were granted in 2016.

Future Focus

Our focus for the future is to retain our market leading position in our technology solutions for the online grocery market. We will ensure this by continuing to innovate and protect our intellectual property through the patent application process.

Patent applications covering over 50 separate innovations

Technology development centres

  1. Hatfield, UK
  2. Krakow, Poland
  3. Wroclaw, Poland
  4. Sofia, Bulgaria
  5. Barcelona, Spain

Risks

  • Technology innovation supersedes our own and offers improved methods of food distribution to consumers
  • Failure to protect our IP
  • Failure to ensure that our technology can be freely operated without infringing a third party's IP

Case Study

Morrisons Update

  • In 2013 we signed a 25 year agreement to provide technology, infrastructure and operating services to launch and operate Morrisons.com, the online business of Wm Morrison Supermarkets PLC, becoming our first platform partner in the UK.
  • Since launch in January 2014, Morrisons.com has grown substantially. The outstanding development of its online business has enabled the retailer to attract new and existing customers with a compelling proposition whilst operating with attractive cost economics.
  • Morrisons.com is currently operated from our Dordon CFC and utilises several of our spoke operations. Operations are enabled by our end-to-end fulfilment solution and proprietary software. Morrisons.com acts independently in making all commercial decisions regarding marketing, range, price and promotions.
  • In August 2016 we announced an extension of this service contract – a testament to the quality of our end-to-end solution.
  • The agreement is structured in a similar way to potential Ocado Smart Platform agreements, and includes the following elements:
  • We will operate a proportion of our CFC in Erith for Morrison.com's benefit. The site is due to commence operations in financial year 2018, allowing the Morrisons online business to continue its substantial growth path.
  • Morrisons will pay recurring fees for its share of the mechanical handling equipment (MHE) capacity, but will not own any of the MHE. This will allow significantly lower up front capital costs for Morrisons.
  • We have committed to providing a store pick solution for Morrisons to allow them to better service the harder to reach geographies.
  • The exclusivity restrictions on UK grocery retailers has been renegotiated, allowing the Ocado Smart Platform services to be available to a larger potential pool of UK retailers.
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