Sunday, 25 March 2012

Ocado - great experiences come with high investment

Given that my wife and I work full time and the thought of traipsing around the supermarket at the weekends with the kids who have the potential to lose the plot at any moment, we frequently use Ocado. The online supermarket, set up through venture capital and until recently, the exclusive online shopping facility for Waitrose, has worked very hard to put the customer at the heart of what they do and it has a proven success formula.

A recent experience reminded me of this. We ordered some goods via the iPad app on Wednesday night for delivery on Sunday night 9pm. A few things to note about ordering:

  • lists are easy to use, remembering similar purchases from before and categorising them
  • delivery slots are hourly; very convenient.
  • certain slots are highlighted as "green", since that particular van is already going to be in your neighbourhood. 
Sunday approached and a call arrived at 7.30pm with the driver stating that she was in the neighbourhood and asking whether it would be convenient to deliver now. However, hearing the screaming kids in the background she quickly said "Shall we just leave it until 9pm?".

At 9pm she called "I see you have a side gate. Is that nearer your kitchen and easier for you? Would you like me to enter into the kitchen or leave the goods at the door?" Finally, a smiley driver greets me at 9pm and leaves the goods, which are already divided into colour-coded frozen and non-frozen bags and with no products missing.

I share the whole story because it's a great example of how to deliver a great experience the customer has to be at the heart of the operating model. Analysing my experience means that they thought of me when they:

  • recruited by hiring on attitude ("we can teach you to drive a truck, but not smile")
  • created a proposition that has colour categorised bags ("what happens after we leave the shopping?)
  • created great delivery interfaces ("this has to remain simple and convenient")
  • invested in one major distribution centre ("we don't want dissatisfaction over substitute orders").
Recently, Ocado posted a loss of £2.4m for 2011. Now in its 10th year of existence, some argue that they have over-invested in order to gain the customer experience they desire and cannot return on the investment. They are indeed investing more, constructing a second major distribution centre. I personally would like to see Ocado flourish. They have all the right ingredients for success. Potential expansion to other parts of the UK might be the key they need to return on such a large fixed asset, since I am sure that others experiencing what I have will be sure to return frequently.

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