Waitrose TDP deal a 'shrewd move' but challenges remain
Earlier this year, we reported that Marks & Spencer and Ocado had confirmed a much touted agreement giving the former a food delivery service for the first time.
And now Waitrose has inked a deal with AI platform Today Development Partners (TDP), co-founded by Ocado co-founder Jonathan Faiman, to succeed its Ocado partnership as it looks to treble the size of its online business over the next three years.
The plan is to develop three automated customer fulfilment centres (CFCs) during that period and create a £1 billion online operation, with Waitrose choosing Retail Director Ben Stimson to head this up, in the new role of Digital Director.
The TDP partnership will provide the retailer with the capacity needed to compete in an increasingly competitive online food and grocery market, potentially doubling its share of the market to 5% by 2022 – a resilient move in the face of the termination of its supply deal with Ocado next September, according to Thomas Brereton, Retail Analyst for GlobalData.
“This appears a shrewd strategy, with GlobalData forecasting the online food market to grow 29.1% to £19 billion by 2022 – significantly faster than the 8.8% growth of the whole market over the same period,” he says.
But although the promise to build three CFCs puts Waitrose on a more even keel with Ocado with respect to logistics and capacity, it will take an equal effort to widen its customer base to achieve such an ambitious target, he adds. Ocado has a significantly more established presence, with its share of the online food and grocery market expected to reach 10.7% during 2019 – fourth behind Tesco, Asda and Sainsbury’s.
“For Waitrose to succeed, it will need to rely on brand loyalty and the associated quality to ensure that it lures as many customers as possible from Ocado when the existing supply deal ends in 2019, and must ensure that it has established unique product ranges to encourage current Ocado shoppers to follow the Waitrose brand rather than accept the changes to M&S products,” Brereton concludes.