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Ocado sees demand surge: Covid-19 bolsters company’s business transformation

Ocado sold half of its UK retail business to Marks & Spencer, in 2019. The deal means M&S will be able to offer an online grocery delivery service, while Ocado shoppers will be able to choose from over 6,500 M&S products while shopping on Ocado.com, alongside the retailer’s own brands and own label products.

The online retailer has transformed itself over the last few years from a domestic grocery delivery company to a provider of state-of-the-art online retail technology.

Ocado’s chief executive Tim Steiner, has secured the firm’s future on selling its software and robots to other supermarket chains across the world; forming partnerships with Kroger in the United States and Casino in France.

Key to the company’s success has been its business model; it started in 2000 as an online supermarket and gradually evolved into a technology company focused on logistics, with ambitions to sell its own software platform, and its own proprietary brand of robots. Ocado has structured its business around deliveries, designing and running highly automated warehouses similar to those operated by Amazon, the world’s third largest retailer. Recent years have seen the company aggressively expand internationally in a bid to generate growth and reduce its reliance on its domestic market.

In its first Asian partnership, Ocado will develop Aeon’s online grocery business. This agreement will see both companies create a national fulfillment network to serve the Japanese market. The partnership will help the business compete with the likes of Amazon, which bought upmarket grocer Whole Foods in 2017 for $13.7bn.

Expansion in new markets will allow Ocado to increase its footprint as well as minimize risk as the uncertainty surrounding Brexit poses a greater risk to the online grocery retailer.

However, Ocado slumped to pre-tax losses of £214.5m ($268.3m) in 2019 after a major fire devastated its flagship warehouse. As a result, the company suffered a 27% fall in core earnings in the 12 months to 1 December, helping to push it losses to nearly five times as much as the previous year. The building provided about 10% of Ocado’s capacity, processing more than 30,000 orders a week.