Ocado Retail Sees Sales Downtick as Consumers Return to Pre-COVID Habits

Ocado Retail Sees Sales Downtick as Consumers Return to Pre-COVID Habits

Consumer demand for digital convenience may be continuing to rise, but eGrocery channels are nonetheless far from a sure bet. Ocado Retail, the joint venture between Hatfield, United Kingdom-based grocery technology firm Ocado Group and London-based retailer Marks & Spencer, has been seeing its performance flag in recent months.

The company reported in a trading statement Thursday (March 17) that revenue was down 5.7% year over year in the first quarter of 2022. In a statement, Melanie Smith, Ocado Retail’s CEO, attributed this downtick to normalization of pandemic trends as consumers returned to their lives away from home.

Notably, adoption continued to grow, with orders per week rising 11.6%. However, the fact that consumers are placing more orders has its drawbacks, as those orders are getting smaller. In fact, average basket size fell 15% year over year. Given the labor cost of delivery, small-basket orders make it more difficult to get the economics of the model to work.

“Long term, we are confident that the trajectory of growth remains positive,” said Smith. “That growth is underpinned by our quality customer service and high customer satisfaction … and enabled by our investment in new hyper-efficient automated customer fulfilment centers which bring wide ranges, the freshest produce, and the best on-time delivery in the market … to our fast growing number of U.K. customers.”

By the Numbers

The online grocery market in the United Kingdom is significantly more mature than it is in the United States, according to data from the November 20201 study “What U.K. Consumers Expect From Their Grocery Shopping Experiences,” a PYMNTS and ACI Worldwide collaboration. The study, which drew from a survey of more than 2,500 U.K. consumers about their grocery shopping habits conducted in September 2021, found that 52% report purchasing groceries online more often than they were before March 2020.

Related news: 52% of UK Consumers Shop for Groceries Online More Than They Did in 2020

Additionally, the report revealed that about one in three U.K. consumers prefer shopping for groceries online to shopping for groceries in stores, a share well above the 18% of U.S. consumers that prefer the same. The most popular eGrocery channel in the U.K. is buying online and having the products delivered to their homes, with 26% of shoppers ranking this their most preferred. In contrast, U.S. consumers favor buy online, pickup in store (BOPIS) options.

What Insiders Are Saying

“I do think it’s [online grocery is] something that we’re going to see way after the pandemic has ended,” Madeline Aufseeser, omnichannel grocery and drugstores leader at ACI Worldwide, told PYMNTS in a December 2021 interview. “In almost every single merchant channel, online shopping has become a norm, and grocers were really the last ones to get there. And COVID forced a seismic shift in their adoption of technology.…Consumers are embracing it, because it’s really easy for them to shop online for groceries, and they no longer have the patience [for] stores … I think we’re going to see a growth of the space.”