Bottom Line: Ocado thinks above and beyond Morrisons

Kasmira Jefford
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Ocado has understandably been coy over the last year about its plans beyond its tie-up with Morrisons. Running the supermarket’s online groceries business was a leap into the unknown and both companies needed time to bed down.

The challenging part was copying the online platform it used to run its own grocery business and creating a version for Morrisons – then running both businesses at once.

But Ocado aims to have solved this costly and time consuming exercise a year from now with a new platform that will allow it to juggle several retailers at the same time, paving the way for international expansion.

A new smaller warehouse in Andover, in Hampshire, will show off to potential partners how it can defy the economies of scale.

Why overseas retailers may want to piggy-back on Ocado’s expertise is self-evident. Or as Steiner, a true salesman, puts it: “If someone comes in and offers you the world’s best platform – it’s a compelling offer”.

And yet, Ocado will have to prove that the economics of the model stack up. Will fees paid by partners to access Ocado’s platform be enough to cover the costs of all the kit?

With its first full year of profits now in sight, some investors will surely be pained to see the group’s hard earned cash disappear again.

But for long-term shareholders in Ocado, this is the phase they have patiently been waiting for. With a new shining platform in place, next year could be a watershed moment for the group. It may even prove some of its harshest critics wrong.

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