Ocado Group CEO sees potential pull back in e-commerce

PARIS – Fear of contracting COVID-19 drove many consumers around the world to turn to e-commerce for food shopping and be willing to put up with limited selection, poor service and higher prices, said Tim Steiner, co-founder and chief executive officer of Ocado Group. He expects consumers will reassess how they shop as more people are vaccinated and markets return to normal.

“This is the new normal and not the old normal,” Mr. Steiner said during a June 21 presentation during the virtual Consumer Goods Forum. “Everywhere during the pandemic, we saw acceleration. We will see it continue, maybe (there will be) a bit of pullback, but then more acceleration.

“The key now is to scale up to the demand we see and offer the quality service and execution people expect.”

Pricing, availability, range, freshness and execution are all attributes retailers competing in e-commerce will need to focus on to get beyond the potential pullback Mr. Steiner referenced and reap the reward of the acceleration he expects to follow.

The biggest challenge e-commerce retailers face is taking cost out of the digital supply chain.

“Digital is more labor intensive than brick and mortar,” Mr. Steiner said.

“This is the new normal and not the old normal.” – Tim Steiner, Ocado Group

To overcome that barrier, Ocado is investing in automation. In October, the company acquired a minority stake in Myrmex Inc., a robotics startup. Myrmex offers solutions that enable click-and-collect deliveries. In 2019, Ocado took a minority stake in Karakuri, a robotic startup that reduces the amount of labor required to assemble ready-to-eat meals.

“We’re working to drive down costs with automation,” Mr. Steiner said.

Another reason for Mr. Steiner’s optimism about the growth of e-commerce is the competitive landscape of suppliers serving the category.

“We’ve seen more people start in this market in the past 12 months than in the past 20 years,” he said. “The vast majority are all chasing one particular part of the market — the ultra-short immediacy trip.”

Mr. Steiner has his doubts about the attractiveness of the category, likening it to brick-and-mortar convenience stores where consumers may seek a few items and be willing to pay a premium, but don’t make it their primary food shopping destination.

“Most consumers in grocery are very price sensitive and looking for the cheapest format,” he said. “I think the market is confused by the past 14 to 15 months of the pandemic.”