Over the next year or so, there are going to be major changes made to Ocado, after a deal has been announced between Ocado and major retailer Marks and Spencer (M&S). In news announced earlier this year, it was revealed that M&S had bought a 50% stake in Ocado’s retail business at a price of £750m.
But what exactly does this mean for the future of Ocado, and its existing customers who use their services through the supermarket Waitrose? We decided to take a further look at what the major changes are going to be.
Why is M&S doing the deal with Ocado?
The retailer has struggled to keep afloat in recent years, amid difficult trading conditions on the UK High Street. It has also been at a major disadvantage online, due to its lack of delivery services for its food products online.
It is hoped that the deal with Ocado will change this considerably. Currently, the average spend online at M&S comes to just £13 in total. Meanwhile, shoppers on average spend £100 per shop online.
What will be the major changes?
After the announcement that Marks and Spencer has bought a 50% share in Ocado, it means that by the end of September 2020 (at the latest, it could be brought ahead earlier than this) Ocado will start delivering M&S products instead of those by Waitrose. September 2020 is the month in which the existing deal that Ocado has with Waitrose officially expires.
Evidently, the major change is that Ocado will no longer be delivering Waitrose products to customers.
Other changes included under this new venture is that Ocado will now be called Ocado.com, and it will soon have access to the Marks and Spencer database of a whopping 12 million food shoppers in the UK.
The deal that will come into effect in 2020 also means that Ocado will no longer have to pay sourcing fees, that had cost them over£15m in 2018 alone.
Will Ocado still deliver the same products?
Yes – to a degree. What we mean by this is that whilst Waitrose products will no longer be supplied by Ocado, it will still supply big name branded goods as well as its own-label products under this new deal with M&S.
What does this new deal mean for customers?
As previously mentioned, the current deal that Ocado has in place to deliver approximately 4,500 products by Waitrose will be expiring in September 2020.
When the new deal comes into effect, customers will then be able to purchase and order more than 4,500 M&S products, as well as big name branded items and Ocado’s own labelled products.
The new deal for existing and future customers of Ocado could also work out to be more cost-effective. According to the M&S chief executive, Steve Rowe, the new deal could mean that existing Ocado customers will save money, as M&S products were on average cheaper than their Waitrose equivalent.
The partnership with Ocado could also see its products in M&S stores in the not so distant future too.
What about Waitrose customers under the new deal?
If you are a Waitrose customer who uses the Ocado delivery service, you may be wondering as to what will happen when the current deal expires. As it stands, the two options that will be available to Waitrose customers will be:
- If they want to continue buying Waitrose products and having them delivered to their property, to switch to Waitrose.com, which has its very own delivery service available to shoppers.
- Alternatively, shoppers under the new deal can stay with Ocado and then make the switch to purchasing M&S products.
Will Ocado still deliver to my area?
Whilst confirmation has of yet not been given, it is anticipated that there will not be major changes to delivery locations under the new deal that has been revealed in February 2019.
Is there a risk involved with the new deal for Ocado?
Some experts have suggested that there could well be an element of risk involved for Ocado by taking on this new venture.
For example, it has been suggested that the new deal could see existing Ocado customers defect entirely to Waitrose once the current deal comes to an end.
Furthermore, others have questioned as to whether Marks and Spencer will have the ability to retain the existing Ocado customer base, who are used to receiving Waitrose products.
However, the Ocado founder and chief executive, Tim Steiner, has brushed off these concerns when questioned by the BBC.