His Lordship sells as Ocado evolves

The reality is that UK shoppers don’t need an end-of-days scenario to turn their attentions to online retail channels. Domestic expenditure on online grocery shopping came in at £12.3bn in 2018, up 9 per cent on the prior year, according to market research outfit Mintel. That marks it as the fastest-growing purchase channel, but the Mintel analysis also points out that 61 per cent of the key 25-34-year-old demographic participated in online grocery shopping, against a general rate of 45 per cent. The implication is that the online share of the market is only heading one way as time progresses.

What assumptions can we draw from this? Presumably, there will be fewer conventional high-street outlets, reduced fixed costs for the grocers and a vast expansion in logistical support at this end of the market.

Management at Ocado (OCDO) is acutely aware of the industry changes under way, so it has opted for the old picks-and-shovels strategy. While the group is still hawking groceries online, it is also leveraging its experience by providing logistical/technical services. There are innumerable commercial examples – from Coca-Cola to the Mexican drug cartels – which show that controlling distribution channels can be more profitable than the production and/or retailing of goods. After all, the online grocery space is bound to become as competitive and discount-driven as its high-street counterpart.