Credit: Ocado

Can Ocado become an international tech success?

The online grocer wants to sell its software abroad, but with AmazonFresh on the horizon it won't be easy.

by Rachel Savage
Last Updated: 10 Dec 2015

This morning Ocado snuck out a fairly innocuous statement announcing it’s going to start selling shares in the US. More interesting was what was buried at the bottom: a declaration of intent to flog its online grocery shopping technology internationally.

It’s not news – in its first half results earlier this month, the company, which runs Morrisons’ online store and has been linked with French giant Carrefour in the past, said it was in ‘advanced discussions… with multiple potential partners’. But it’s a reminder that the first, long-awaited international tie-up is still yet to materialise this year, as promised.

Ocado’s future should lie in selling its technology to supermarkets. It’s not doing badly selling food itself in the UK, especially given the state of the market. But it only reported its first profit since it was founded in 2000 this year on the back of the Morrisons deal.

And there’s still a question mark over whether that model is viable. Big retailers like Tesco and Walmart are investing in their in-house online operations. And UBS poured cold water on investors’ expectations for Ocado’s impending international deal on July 17, pointing out the company had said short-term profits would be ‘modest’.

Ocado's shares have been on a rocky ride in the past couple of years.

Furthermore, AmazonFresh is ramping up in the US and expected to launch in the UK, where it would land squarely on Ocado’s turf, in the next couple of months. Other countries will surely follow.

That could nonetheless be a boon for Ocado – supermarkets that haven’t yet got their online act together may realise they need to act fast as Amazon encroaches on their territory, and decide that buying in the technology is the best way to go about that. And there could well be plenty of said supermarkets – the UK is one of the most-developed market for online groceries in the world, so is relatively ahead of the game.

Nonetheless, outsourcing online shopping is not yet completely proven as a model. We don’t yet know what new Morrisons chief exec David Potts thinks of their tie-up and a renegotiation of Ocado’s troubled relationship with Waitrose is also coming in the next couple of months. Unless the international deal turns out to be a whopper when it's finally announced, Ocado’s global ambitions will probably have to be more minnow than whale.

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