Thursday, 1 April 2010
Delivering on potential?
Internet grocer Ocado has announced that it is to create 2,200 new jobs by developing a new distribution centre, according to reports. The Guardian reported that the online company plans to fund the new centre through the proceeds of a planned floatation after the election. Ocado has said that potential sites for the £100 million, 25-acre project include three locations in the West Midlands and two in the south of England, although a final decision has yet to be made.
Hmm. A new centre. I wonder what for? They already have an ultra hi-tech 1.2 million sq/ft distribution centre in Hatfield. They own no shops. There was talk about them expanding into the North of England a few years back.
A reduced operating loss of £14.4m on sales up 25% at £402m in 2009. £350million has been sunk into Ocado since it was started in 2000 and have talked about a stock exchange listing for years.
There may be a floatation after the election with a valuation figure of £1 billion being mooted. But Ocado has yet to make a profit after a decade in business.
Even more problematic is the 5 year contract to deliver the Waitrose brand within the M25 ends in 2013.John Lewis Partnership are keen to expand their Waitrose Deliver service, which many people think is Ocado anyway. Look at this forum for some of the differences. If Waitrose don't renew the deal to supply Ocado with Waitrose foods, or maybe renew on more favourable terms then what would happen to Ocado? JLP pension fund has a 29% stake in Ocado so I guess they don't want to cause it too many problems.
Anyway...the business model of Home Shopping from either Supermarkets that supply from their own stores with staff already employed or state of the art huge warehouses is not quite settled.
Ocado can deliver for anyone it likes. So who is this distribution centre for ?