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The Ocado's Model

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As discussed, the last mile is a process whereby online grocery enterprises offer at a cost. Although they try to minimize the expenditure in this part of their supply chain, they still incur a specific cost that influences the profit and revenues they obtain from the market. Thus, grocers are going the online route for a price. However, there has been an emergence of 3rd party distributors within the supply chain who have the initiative to handle the picking, packing, payment, and delivery tasks for these grocery entities, but the question remains whether these 3rd party distributors are in a position to absorb all the marketing, logistics, operations, and sourcing costs. Aitken argues out that it is impossible for 3rd distributor entities to succeed in the supply of online groceries due to the massive challenges the sector faces in all fronts (2016). …show more content…

As a 3rd party distributor, Ocado and other companies incur all the cost in the last mile from other online grocery entities. These 3rd party entities claim that they inhibit models that make them inhibit a cost advantage, but this claim is questioned when they are compared to store-based retailers. However, other analysts argue that the Ocado’s model is efficient. Precisely, it has distribution centers that are technology enabled that makes it operate at the lowest cost possible (Aitken, 2016). Additionally, the fact that it offers distribution for several online grocery enterprises makes it distribute its cost across these companies; hence it achieves cost

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"Our success as a retailer shows that we can offer customers unrivalled choice, quality and convenience, efficiently and profitably. The opportunity to partner with Kroger to transform the way in which US customers buy grocery represents a huge opportunity to redefine the grocery experience of Kroger's customers and create value for the stakeholders of both Kroger and Ocado. As we work through the terms of the services agreement with Kroger in the coming months, we will be preparing the business for a transformative relationship which will reshape the food retailing industry in the U.S. in the years to

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The growth in revenue also results from a steadily increasing user base of the retail company (Robinson, 2017). Ocado saw an increase in active customers from 355,000 in 2012 to 580,000 in 2016, which is 63% more. 4.2 Stock Price Ocado hasn’t made much of a progress in terms of stock prices in the last few years. In January 2013 Ocado opened a new Customer Fulfilment Center (CFC) in Dordon, which improved the business’s operating efficiency and capacity (Ocado Group, 2013). On the 17th May 2013 Ocado signed an agreement with Morrisons for providing ecommerce services regarding Morrisons online retail website (Ocado Group, 2013).

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Thus, Morrisons can effectively compete with strong rivals on price-cuts. Morrisons runs distribution centers across UK along with third-party facilities operating in distribution network (Morrisons, 2016). These centers resemble to Amazons fulfillment centers, which store all kinds of goods. With use of these centers, Morrisons manages to keep up with growing customers’

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