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Will Waitrose’s online investment threaten Ocado?

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Waitrose has announced that it is investing £10 million to upgrade its website and it has been suggested that the retailer may start online deliveries within the M25.

This will have grabbed the attention of e-tail grocer Ocado which currently delivers Waitrose produce, along with some of its own-brand items, in a number of areas of the UK.

London is one place which Ocado had a monopoly on delivering Waitrose products but customers had a choice of service across the rest of the country.

Nevertheless when Mark Price, the supermarket’s Managing Director, said last weekend that “this new platform accelerates our progress as a truly multichannel retailer”, it seems the competition is likely to increase.

Nick Bubb, Retail Analyst at Arden Partners, argues that Ocado should not be too worried by Waitrose’s ambition for London deliveries considering its strength around the rest of the country.

“Waitrose Deliver already ‘competes’ with Ocado outside of London and that is where Ocado’s fastest growth is coming,” Bubb commented.

“Inside the M25 Waitrose doesn’t have that many stores with car parks big enough to do in-store picking and delivery etc, no matter how snazzy its website.”

Upgrading its online offering is a sensible move for Waitrose however, with around four per cent of all groceries now bought via the internet, and it can help generate growth outside of extending store portfolios.

Industry analyst Jonathan Banks adds: “As more grocery retailing switches to online it has become a significant channel in its own right, so any self-respecting retailer will ignore it at its peril.

“It also gives retailers an easier method of increasing their footprint, reaching otherwise hard to get to areas for their bricks and mortar offerings due to lack of sites, or the usual difficulties obtaining planning permission.”

Waitrose plans to improve the customer experience of its online service by adding new delivery slots during demand times as part of its investment.

The Waitrose Deliver brand is being replaced by Waitrose.com which will incorporate all online channels, including click and collect, wine, flowers and gift ordering, Home Direct and Waitrose Entertaining, on to one seamless offering.

Banks thinks that this improvement of service is a bigger threat to Ocado in the long term than a delivery expansion into London, and says that the customer experience should be the e-tailer’s main focus going forward.

“For Ocado to succeed they need to concentrate on the drivers of their brand equity,” Banks added.

“An improved offering from Waitrose will inevitably make it harder for shoppers to differentiate between the two, so Ocado will have to work even harder on what’s important to its shoppers.

“This means ease of use of the portal, online transaction time taken, delivery slots, range, availability (i.e. no substitutions/cross-offs), quality (especially fresh fruit and veg), and only after all of those things - price and promotions.”

Published on Tuesday 22 February by Editorial Assistant

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