Ocado’s marketing challenge

Ocado is nearing the appointment of an agency to manage its media planning and buying following a review which kicked off in January. But, as the online supermarket’s head of brand admits, it’s still got no idea how or where it wants to advertise itself.

Since it was founded in 2000, Ocado has slowly built up a strong presence in the UK thanks to tie-ups with more established retailers like Waitrose and Morrisons. It’s advertising, however, has remained digitally focused and has largely been handled in-house.

Speaking to The Drum recently, group head of brand Kristian Brugts said that the hire of external agencies – it appointed Now to the creative account last year – and the decision to put greater budget behind broadcast media should not be read as a sign of what he described as “oh my god we need more business”.

Instead, it’s linked to the massive investment into a new flagship distribution centre – which is tipped to double its order capacity to over 600,000 per week – as well as improvements to its online infrastructure.

“We’re growing at a healthy rate,” he said. “It’s almost about future-proofing, if we needed more customers with the new facilities. [And] it’s time. We’ve always handled these things internally so it’s just times to hand it over.”

But, it’s not a matter of “if” Ocado needs more customers. It does. And fast.

Despite a 13.1% sales increase in the most recent quarter (13 weeks to 26 February), wealth management firm UBS said that growth in the UK online grocery market is slowing and Ocado could feel the heat, especially given the precarious position it’s left itself in with the build of the monster warehouse.

“To reach scale, we see [Ocado] needing to acquire customers more aggressively through a combination of price and marketing investments, likely to the detriment of profitability”, said UBS, adding Ocado will need to grow weekly orders by 13 per cent a year through to 2021 if its distribution centre is going to work to at least 90% of its potential.

“Ocado may be able to meet medium-term consensus expectations on order growth; or it may be able to meet expectations on…