Ocado preps IT platform for international expansion

Ocado is focusing moving its IT systems to the cloud to enable international expansion, the retailer revealed as it reported a growth in revenue and profit for the first half of 2014.

The online groceries retailer is in the process of replatforming its IT systems to enable faster replication and rollout of its technology, for example, as it did for supermarket Morrisons’ online grocery service.

“We continue to expand our IT team, and expect to increase further the numbers of our developers and other IT staff, to over 600 professionals by the end of 2014. The primary focus will be on the replatforming for international expansion, improving customer interfaces and other projects to drive improvements to our proposition to customers and drive efficiency in our operations,” Ocado said in its 2014 half year results today.

“Our new modular, scaleable fulfilment assets combined with our replatformed technology will enable us to offer potential partners a lower risk, less capital intensive platform solution for online retailing.”

The retailer added that it continues to receive interest from potential partners from a “broad international geography” to discuss how it can help them to introduce or improve their online businesses in their own markets.

Attractive charging model

Ocado believes that its charging model for its technology services to commercial partners like Morrisons is “compelling”.

As part of a 25-year partnership, Morrisons, for instance, paid £20.3 million to Ocado this year, which includes annual fees for services, IT support and R&D and management fees.

“We expect the model for these services to be weighted towards ongoing annual usage fees rather than the high upfront fees typical of the technology licensing market, which we believe will make it a compelling proposition to potential partners,” it said.

Different sectors

Ocado has used its ability to replicate its platform to expand into different areas of retail as well.

In 2013, it launched Fetch.co.uk, its first non-food website aimed at pet goods buyers. It plans to launch a specialist kitchen and homewares shop, Sizzle.co.uk, in the second half of 2014.

Optimised operations

The retailer has also optimised its operations, which is heavily underpinned by technology.

“Our Hatfield Customer Fulfilment Centre (CFC1) continued to operate to a high level and with improved efficiency. Using the units per hour efficiency measure (UPH), the average productivity for the period in CFC1 increased to 142 UPH (from 132 UPH in H1 2013)”, Ocado said.

Further, in the first half of 2014 Ocado started installing four purpose-built bagging machines in its Hatfield CFC, which are expected to be operational later this year.

Significant numbers

Ocado reported 396,000 active customers at the end of H1 2014, up from 360,000 in the same period last year.

It delivers an average of over 161,000 order a week, up from 139,000, and over 45 percent of all orders delivered now check out over a mobile device, and mobile apps account for over 35 percent of all checkouts. It plans to launch a mobile version of its website in the next few months.

It said that a customer’s average basket standing at £114.43, slightly less than the £114.90 last year.

Despite this, Ocado reported a 21 percent increase in revenue to £429.7 million in the 24 weeks ended 18 May 2014, up from £355.9 million in the same period in 2013. Its pre-tax profit was £7.5 million, up from a loss of £1 million last year.

Copyright © 2014 IDG Communications, Inc.

8 highly useful Slack bots for teams