OCADO

Online grocery business model

Submitted to: Prof. Venkatramanan Krishnamurthy

By: Sanchit Gupta | Vishnu Shankar Shukla

 OCADO
Online grocery business model
OCADO
• 1.2 million square foot dedicated central
Facility distribution centre in Hatfield
• A network of five regional trans-shipment
points and a fleet of 70 double-decker
Transportation trucks supported the CFC.
• OCADO also operated a fleet of over 500
specially designed Mercedes home
delivery vans, equipped with satellite
navigation systems
• The goal was to make an average of 15
deliveries per route.
• Groceries were put in color-coded boxes
Last mile delivery and routed to the delivery truck
• The trucks then either delivered the goods
directly or to one of the trans-shipment
points, where the customer service team
took over and delivered the goods in
smaller trucks
TESCO
Tesco chose to keep its existing stores as
distribution centres rather than building a new
warehouse dedicated to its online business.
1800 vans and retail outlets
The order was assigned to a
van that would make the delivery, and then
sent on to a “picking trolley.”
Trolleys were
equipped with a touch-pad computer with
shelf-identifier software that planned efficient
routes through the store and scanned each
item to verify it was what the customer had
Requested.
 OCADO
Online grocery business model

Tesco Distribution Model

Ocado Distribution model

 OCADO
Online grocery business model
 OCADO
Online grocery business model

Whether consumer behaviour differ when shopping for groceries online vs. offline? If yes, how?
Online Groceries Offline Groceries

Directly Go to established Brand for First check and feel by their own
purchase senses and then decide buy decision

Bargaining
No Bargaining
Price first, convenience next
Convenience & shortage of time
Consumer Behaviour No such recommendation
Recommendation & Personalization of
buying cart Higher over-odering

Purchase & Pay at the point of

purchase Purchase, Either pay at that point or
get on credit
 OCADO
Online grocery business model

What customers want from an online grocery store?

• Savings in term of discount & Coupons

• Convenience in term of last mile delivery
• Saving time by avoiding queue & intricate parking
• Easily accessible user Interface & secure payment system
• On time delivery
• Recommendation on the basis of complimentary product
• Easier user interface to find variety of products.
 OCADO
Online grocery business model

Analyze the pros and cons of the distribution model of Ocado and Tesco?
OCADO Tesco.com

Pros • Ocado has its single warehouse unit.
• Automation of CFC led to reduce in
picking & delivery time per hour.
• Efficient Supply chain.
• Low fixed cost.
• The automated and single warehouse
grocery model allows OCADO to apply
company policies in a uniform/single way.
• Lower Labor cost
• Tesco has its own brick & mortar store which act like its warehouses.
• Order placed by customer sent to nearest store.
• Responsive Supply chain.
• TESCO can continuously adapt better to demographic changes, to new
cultural trends and to expanding markets.
• High fixed cost

Cons • OCADO has a limited capacity to grow due •
to their targeted client and the warehouse
model that cannot reach scattered
households.
Taking into consideration that products come from their stores visited by
hundreds of people every day, some products might lose freshness and
quality.
• It depends on 300 stores using them as warehouses. That means that if
TESCO starts loosing market against online groceries, Some TESCO shops
will no longer be profitable and provably have to close.
 OCADO
Online grocery business model

What should be the future strategy of Ocado?

• Ocado can introduce some hyper local Pick up centre to reduce the time and cost
of last mile delivery.
• Ocado can invest in building some small DC.
• Ocado should spend more on vertical integration & promotion of their own
brands.
• Ocado should spend more on technologies such as BI, drone delivery etc.
 OCADO
Online grocery business model

What should be the future strategy of Tesco.com?

• Enhance online customer experience.

• Tesco should introduce new technologies and model to reduce their inventory cost.
• Should plan to move from two hour slot to one hour delivery window.
Thank you