Revenue rises as Ocado hits the right blend of automation and human skills

UK-based online retail giant Ocado has reported a year-on-year quarterly revenue increase of 11.5%, following the opening of a state-of-the-art automated warehouse.

In the quarter to the beginning of September, the group posted total revenue of £348.6m, compared with £312.7m in the same period in 2017.

The number of orders processed also surged, by 11.4%, from 254,000 last year to 283,000.

The growth was attributed to the summer opening of its latest customer fulfilment centre (CFC) in Erith, south of London, which it claims will be largest of its type in the world when it reaches full operating capacity. Last year Ocado launched a similar operation in Andover, Hampshire.

CEO Tim Steiner said: “The new capacity from Andover and Erith, our third and fourth robotic warehouses, is helping meet consumer demand for our services and drive the channel shift which is transforming grocery retailing in the UK.

“Last week Erith processed over 20,000 customer orders, 14 weeks after opening, a number which took Andover 15 months to achieve.

“Together, Andover and Erith provide new opportunities for growth in our UK retail business while showcasing the scalability, adaptability and efficiency of our platform.”

Manu Tyagi, associate partner of retail and consumer goods practice at Infosys Consulting, said: “Ocado’s rising sales figures provide the perfect example of the impact automated warehouses are having on online retail.

“Ocado is clearly an example of automation done right. What it has done especially well is to balance the use of both humans and machines in its operations. By retaining workers for ‘intelligent’ jobs – such as sales and business strategy – and deploying robots to do manual work like picking and packing, Ocado has not only streamlined, but also enhanced its supply chain. Today’s figures show that shareholders and customers alike are reaping the rewards.”

And this year, Ocado’s model has become increasing attractive to retailers outside the UK. It has signed deals – in Canada with Sobeys; with Swedish retailer ICA; and most recently with US supermarket giant Kroger – to implement its Smart Ocado Platform to develop their online grocery businesses.

“Ocado’s unique and proprietary technology, which makes these facilities work, is bringing greater value, quality and convenience to British shoppers, while at the same time helping our partners redefine the shopping experience for their own customers,” Mr Steiner said.

“We are on track to deliver a significant number of new CFCs for our Solutions partners and as such fulfilling our goal of changing the way the world shops,” he added.

For Sobeys and ICA, it will jointly develop CFCs in Toronto and Stockholm over the next two years; while it continues to negotiate an overall services agreement with Korger to develop CFCs across the US. The two companies are currently identifying the locations of the first three sites.

Mr Tyagi said: “It’s no secret that the rise in connectivity has led to an age of urgency in retail. Consumers now expect to order and receive items in a matter of hours, an expectation that has recently extended beyond Amazon orders and into consumers’ weekly grocery shops.

“Automation, when rolled out efficiently, can help boost e-commerce sales by providing consumers with what they want, when they want it. Retailers both online and on high streets are under constant pressure to keep up with this growing customer demand.”