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Poker,
Ocados current and prospective partners will be constantly re-evaluating the merits or otherwise of Ocados proposition in far greater detail than myself. As the market and consumer behaviour changes so will their outlook.
Personally I view the overall economic environment to be very detrimental to Ocados prospects hence my sell. I have followed every aspect of Ocado for many, many years. Always interested in investing in them at the right price.
Important to understand and acknowledge the ultra fast grocery threat to Ocado rather than dismiss it as some couriers unprofitably whizzing around on bikes dropping off some cokes and a curry. The articles I have attached explain this in more detail.
Ocado as said may well see off this threat, gain more clients and march onwards, let's see
Best of luck to you too.
valueplay
with Ocado you appear to gave gone from Gamekeeper to Poacher .... despite knowing of all the issues you now post about whilst such a positive gamekeeper .... I guess when you are "Very interested in capitalising on another good entry point to the shares " it is not unusual to suddenly turn 180 degrees on a view point
From " More and more grocers will feel they want to be the Ocado Solutions partner rather than let a competitor use it. " to now believing that grocers suddenly think twice about investing in it ..
Thankfully business leaders and forward thinkers wont spin on a sixpence in quite the same way
valueplay
good luck..you have certainly been taken in by the Church of certain Analyst Opinion ..
good luck
I think we have debated the subject ....
The current large grocers risk losing valuable market share if they do not compete in the ultra fast delivery market -
https://www.chargedretail.co.uk/2021/08/27/tesco-sainsburys-and-ms-to-lose-up-to-4-of-sales-to-ultra-fast-delivery-firms-if-they-do-nothing/
* £200 billion
More wealthy, tech savvy customers who are more likely to order high margin luxury goods. It's a market major grocers need to be a strong player in.
OMG - so what are these "high margin luxury goods " that are going to a massive threat to the £20 billion grocery sector then ?..and what insurance are the e-bike riders going to have to pay carrying them around ?
.. picking up a bottle of whiskey from Tesco or delivering a ready made meal to an Airbnb is merely providing delivery options .... an added service to the "same day delivery" options ....you merely pay more for the service
That's your view chilting. There are other very large investment banks who feel the opposite though. JPMorgan is one, another is Berenberg, see article below:
https://www.chargedretail.co.uk/2021/08/27/tesco-sainsburys-and-ms-to-lose-up-to-4-of-sales-to-ultra-fast-delivery-firms-if-they-do-nothing/
The ultra delivery market is too crowded, some will fail. Those who emerge stronger though will be very lean competitors to the existing grocery retail trade.
2022 has been brutal for online grocery retailers and most growth shares. Most shares have dropped greatly. Many companies, like gorillas, in the face of such conditions have chosen to change focus on profit by cutting losses. Uber has recently also followed this path. Ocado currently is incurring higher losses, its shares have tumbled but is still maintaining its focus on product development, building out its network. There's a chance though that Ocado will similarly change focus if its shares drop further and market conditions become harsher.
Ultra delivery grocery in major city centres is a lucrative market. More wealthy, tech savvy customers who are more likely to order high margin luxury goods. It's a market major grocers need to be a strong player in.
As I said the ultra fast model doesn't work, however you try to twist it, the profit isn't there.
It works for takeaway, because its added value and consumable straight away, but stretching it into grocery delivery is one step to far.
" One thing is under increasing threat as companies look for steadier ground: the 15-minute guarantee. Gorillas and Jokr are scaling back blanket assurances of ultrafast service and are adding estimates of how long orders will take"
The whole thing was some mad dash for market share offering big discounts and making big losses
Now uktra-fast with no guarantee of "ultra-fast" as safety takes over
" Gorillas plans to lay off 300 people, cutting its administrative staff numbers in half, as the German grocery delivery app shifts its focus from rapid expansion to turning a profit."
https://www.thetimes.co.uk/article/grocery-deliveries-profit-motive-takes-over-as-gorillas-lays-off-300-staff-0m7s8rgzz
The UK grocery market sales are over £200 billion a year....when your ultra fast 10 minute e-bike scooters take even 1.7% of it for delivery we can celebrate their enormous threat
" Venture capitalists poured $9.7 billion into rapid-delivery companies globally in 2021, according to PitchBook. A few months into 2022, that optimism seems like a distant memory."
https://www.bloomberg.com/news/articles/2022-04-08/15-minute-grocery-delivery-services-hit-reality
Bayobach,
The ultra fast delivery model is continually evolving at a fast rate. Most ultra fast delivery models are utilising dark micro warehousing and will do so more, along with more use of tech, as their contracts increase along with their network.
It's a threat to Ocado and all the other grocers. Grocers are combatting the threat in different ways but the great majority are choosing to fight back in the space rather than ignore the new business opportunity.
They are responding to a threat by using other companies experience/ tech to combat others in that ultra fast delivery space. They have also recently signed a partnership with Uber eats to expand delivery to 600 stores. They clearly see the ultra fast delivery proposition as one that customers are demanding increasingly.
Tesco tried to launch their own ultra fast delivery service, it failed so they partnered with others.
As Pokerchips says: There is a demand for quick deliveries .... but it's a different model and warehousing system …..
As I understand it, Deliveroo, and other similar offerings, are effectively a courier service from a local store (or fast food outlet) to your door - there’s no warehousing involved is there? I understood that Aldi discovered that it wasn’t worth pursuing it and that ‘click and collect’ was perfectly adequate for their business. A local supermarket is organised for public browsing, trolley filling and checkout - not high storage volumes, fast selection and despatch. They don’t have the manpower to do it at scale, the aisles are arranged for display and have to be restocked manually.
https://www.thegrocer.co.uk/aldi/aldi-ditches-deliveroo-as-more-normal-shopping-patterns-drive-down-demand/663682.article
OCDO is a different offering requiring a more efficient logistical system which offers a very wide choice and, typically, delivery of a weekly family shopping order. Corner shops and small stores have survived alongside super stores so there's clearly room for both models.
" Tesco were concerned and to combat the threat "
you certainly are amusing - I will give you that
They are merely adding a delivery option .like WHSmith added Deliveroo .... but to see it as a threat to their business ..is pushing it...
Tesco were concerned and to combat the threat they signed a partnership with gorillas in Oct 2021:
https://news.sky.com/story/tesco-and-gorillas-partner-for-rapid-grocery-deliveries-12453467
I also saw a Getir delivery with 3 x 6 packs of Coke - gee wizz ..whoopie doo...
So good to know our nation has a back up ready to feed the nation of 60m - I am sure Tesco are trembling
I'm not writing off Ocado retail. Simply saying that ultra fast grocery retailers represent a threat to their current overall market share. Consumers increasingly are wanting small quick baskets of goods. The ultra fast delivery outfits will evolve quickly and become more nimble after the job of building out their network is done.
I think the ultra fast delivery model could burn out.
It is so dependent on a cheap pool of labour and as competition grows prices are bound to become more competitive for the service offered but at the same time delivery drivers will want more wages or they will move to a competitor.
Also regulation hasn't really caught up with the industry yet - that's bound to push up prices when it does.
" ultrafast delivery is a scale game and the unit economics for the new players do work and can achieve 10-15%+ contribution margin long term"
LONG Term ... SCALE game ....
Its a different market and the big supermarkets will happily let the start-ups try things out ...the big boys tend to watch and learn the market and then strike a competitive Offer once they have their model and the market fully figured out .. I wouldn't write off the likes of Ocado Zoom or others just because some start-ups have started growing the market
There is a demand for quick deliveries .... but its a different model and warehousing system ..at least at present
JP Morgan for example as below, they are not nuts...
"Overall, we feel even more assured of our view that: 1) major changes are about to come in regards to consumer grocery shopping patterns; 2) ultrafast delivery is a scale game and the unit economics for the new players do work and can achieve 10-15%+ contribution margin long term with operations also being successful in less urban areas and 3) ultrafast online grocery could become the third significant disruption for grocers since 2008"
Fitch outline that new funding will be needed in 2023. Credit markets have deteriorated greatly since then and in all probability will do so more in the coming months. Ocado may well choose to raise cash from shareholders in its next fundraise.
Valueplay
with respect ....you must be nuts if you see this as a " significant threat " - ..you are talking about a threat to Ocado Zoom.... twiddly dee... Ocado is MUCH MORE than that
“The 15-minute delivery model requires a fundamentally different operating model and infrastructure to what Ocado has today, so they are quite simply not placed to compete, even if they wanted to,” says Simon Geale, executive VP of supply chain consultancy Proxima.
Fair enough Poker, I could easily quote the opposite argument in a quote from those articles.
We will see, they are more of a threat than most realise I believe.
I'm raising the issue that they are a significant threat and a lot more than just couriers. Not saying they are sure fire winners. Ocado may well adapt to see off the threat.
We will see in the coming months..
Contracts for the 600 bots will come through. Question will be though are they of a big enough scale.