Discussion
Ocado, the online service that delivers Waitrose groceries, is aiming for a valuation of more than £1bn when it floats on the London Stock Exchange.
Ocado said it would price its shares at between 200 pence and 275 pence. Taking the midpoint of the price range would give Ocado a market value of £1.18bn.
Ocado, which was set up in 2002 by three former Goldman Sachs bankers - has never made a profit.
For some life is too easy !!
Ocado said it would price its shares at between 200 pence and 275 pence. Taking the midpoint of the price range would give Ocado a market value of £1.18bn.
Ocado, which was set up in 2002 by three former Goldman Sachs bankers - has never made a profit.
For some life is too easy !!
Timmy35 said:
I wouldn't touch them with a barge pole.
Care to elaborate?Personally I'd like to see a proper balance sheet before investing, and some profit per customer details and other key performance indicators. So far they have been investing heavily in their infrastructure, much like amazon did and I don't see how they could not make reasonable profits in the future.
As an extremely satisfied customer of Ocado, they really have the fundamentals of customer care, intelligent substitution (unlike all the other supermarkets) and refunds down to a T. They have always been reliable (unlike Tesco who never showed up last time we used them), with good communication giving details of van to expect and details of any substitutions to allow you to choose to accept them.
At the right price I'd buy Ocado shares like a shot, the only problem is knowing what the right price should be and how that compares to the other big supermarkets. I would imagine a plethora of small shareholders advocating their friends and family to buy from Ocado might just be the salesforce Ocado need.
Just my 2p and I'd love to hear other peoples views on this float.
I think this share listing is to pay for a new distribution centre in the midlands or north of England....and to put some cash in the founders pockets (and the John Lewis pension fund who IIRC coreectly own 25% of Ocado). The latter means John Lewis aren't likely to walk away from the deal they have with Ocado IMHO.
The thing about Ocado (which is very different from Amazon) is that there costs are all in the last mile....i.e. if they can get the scale so that a van is making two or three deliveries every hour then they will probably make a lot of money. If those delivery vans are only making one delivery an hour then I think they will struggle to make money. Let's say the average customer spends £100...what do Ocado hope to make on those groceries ? £10 ? £20 ? How much does it cost to put the driver and van on the road for an hour ? Must be at least £15 and hour ? Maybe £20 ? Then they have all the distribution centre costs ? It's hard to see how it makes money. I think it's a great service and I use them at least once a week but the thing is that the deliver ALWAYS turns up on time at the beginning of the hourly slot which to me means that the vans/drivers aren't busy enough...they have a huge amount of spare capacity in the business. I'll buy the shares once my delivery driver isn't turning up with the punctuality of a nuclear clock.....
The thing about Ocado (which is very different from Amazon) is that there costs are all in the last mile....i.e. if they can get the scale so that a van is making two or three deliveries every hour then they will probably make a lot of money. If those delivery vans are only making one delivery an hour then I think they will struggle to make money. Let's say the average customer spends £100...what do Ocado hope to make on those groceries ? £10 ? £20 ? How much does it cost to put the driver and van on the road for an hour ? Must be at least £15 and hour ? Maybe £20 ? Then they have all the distribution centre costs ? It's hard to see how it makes money. I think it's a great service and I use them at least once a week but the thing is that the deliver ALWAYS turns up on time at the beginning of the hourly slot which to me means that the vans/drivers aren't busy enough...they have a huge amount of spare capacity in the business. I'll buy the shares once my delivery driver isn't turning up with the punctuality of a nuclear clock.....
I have mixed feelings on this one.
I have been an Ocado customer a few times, but I will not invest.
The situation is very akin to Amazon before it made a profit. I guess their hope is that they don't make money at the moment simply because the market for internet groceries is currently small. As soon as the market expands and becomes the norm they become the major player. Like Amazon.
However, I see a problem. Asda, Tesco et al all have similar services. But cheaper. Secondly, they already have a huge infrastructure in place to have the food. For example, I have 3 Adsas, a Tesco and a Sainsbury's within 5 miles.
Therefore as was correctly said the main cost is the logistics and the other supermarkets already have a huge advantage.
So, if the market does take off so that 10%, 20% or more of grocery shopping is online, Ocado are *still* not best placed to capitalise.
I'm out.
I have been an Ocado customer a few times, but I will not invest.
The situation is very akin to Amazon before it made a profit. I guess their hope is that they don't make money at the moment simply because the market for internet groceries is currently small. As soon as the market expands and becomes the norm they become the major player. Like Amazon.
However, I see a problem. Asda, Tesco et al all have similar services. But cheaper. Secondly, they already have a huge infrastructure in place to have the food. For example, I have 3 Adsas, a Tesco and a Sainsbury's within 5 miles.
Therefore as was correctly said the main cost is the logistics and the other supermarkets already have a huge advantage.
So, if the market does take off so that 10%, 20% or more of grocery shopping is online, Ocado are *still* not best placed to capitalise.
I'm out.
Greenie said:
Podie said:
Seriously risky, IMO.
Waitrose can back out of using them, and setup their own service. (ETA, think after 2013)
Going to watch this with interest...
Sept 2020 actually.Waitrose can back out of using them, and setup their own service. (ETA, think after 2013)
Going to watch this with interest...
Edited by Podie on Tuesday 6th July 16:46
Waitrose are delivering in there own vans in my area
https://www.waitrosedeliver.com/wdeliver/app/shop
stevieb said:
Greenie said:
Podie said:
Seriously risky, IMO.
Waitrose can back out of using them, and setup their own service. (ETA, think after 2013)
Going to watch this with interest...
Sept 2020 actually.Waitrose can back out of using them, and setup their own service. (ETA, think after 2013)
Going to watch this with interest...
Edited by Podie on Tuesday 6th July 16:46
Waitrose are delivering in there own vans in my area
https://www.waitrosedeliver.com/wdeliver/app/shop
Hmmm a company that has never made a profit in 10 years up for sale for over a billion just as VAT goes up and money in general is tight? Sounds like a dot com bubble to me. Fair enough they went from £43m loss in 06/07 to £2.5m loss in the first half of this year, but still.... Maybe they have over £1bn assets?
JustinP1 said:
Like Amazon.
However, I see a problem. Asda, Tesco et al all have similar services. But cheaper. Secondly, they already have a huge infrastructure in place to have the food. For example, I have 3 Adsas, a Tesco and a Sainsbury's within 5 miles.
Therefore as was correctly said the main cost is the logistics and the other supermarkets already have a huge advantage.
So, if the market does take off so that 10%, 20% or more of grocery shopping is online, Ocado are *still* not best placed to capitalise.
I'm out.
100% Agreed.However, I see a problem. Asda, Tesco et al all have similar services. But cheaper. Secondly, they already have a huge infrastructure in place to have the food. For example, I have 3 Adsas, a Tesco and a Sainsbury's within 5 miles.
Therefore as was correctly said the main cost is the logistics and the other supermarkets already have a huge advantage.
So, if the market does take off so that 10%, 20% or more of grocery shopping is online, Ocado are *still* not best placed to capitalise.
I'm out.
We were talking about Ocado over dinner last weekend. One person at the table loved the service, and was extremely keen to get shares in the company as they thought they did everything "right". Because of the service, they didn't mind paying a small premium for their goods.
Unfortunately for us seasoned online players, we know the percentage of customers who will pay an extra 5-10% for service online is depressingly small, and in certain verticals non existent! With sites like http://www.mysupermarket.co.uk/ doing a reasonable job of price comparison, further margin erosion will most likely occur and the critical mass Ocado needs to become profitable will never come.
Amazon had it (relatively) easy, they were pioneers with no competition. I feel Ocado is going to struggle. Their biggest opportunity in the future might be to licence their technology to the big 4.
Come to think of it, who the hell is behind MySupermarket, how the heck did they build such a decent site, AND then get Tesco, ASDA, Sainsbury's and Ocado to agree to play ball.
Fair play, they've done an excellent job, but I'd hate to see their balance sheet!
ETA: From what I've read they've taken 9 million in VC funding.
Fair play, they've done an excellent job, but I'd hate to see their balance sheet!
ETA: From what I've read they've taken 9 million in VC funding.
Edited by jon- on Wednesday 7th July 10:45
Greenie said:
Podie said:
Seriously risky, IMO.
Waitrose can back out of using them, and setup their own service. (ETA, think after 2013)
Going to watch this with interest...
Sept 2020 actually.Waitrose can back out of using them, and setup their own service. (ETA, think after 2013)
Going to watch this with interest...
Edited by Podie on Tuesday 6th July 16:46
http://www.waitrose.com/forum/default.aspx?g=posts...
That thread with some input from Waitrose officials seems to suggest that 'Waitrose Deliver' is done from stores and Ocado is done from a central distribution centre. Interesting that the Waitrose staff are clearly pushing 'Waitrose Deliver' over Ocado.
With that in mind I think the Waitrose angle is a bit of a red herring as they are just suppliers more then anything. Perhaps their name added credibility to Ocado at first but I think Ocado is large enough now to stand on it's own feet both as a brand and in negotiating directly with suppliers. I don't know if the relationship with Waitrose costs them in terms of being tied to a supplier. Either way, I'm sure it was a huge help when starting up but now they are established I don't think it'd be problem if the relationship was terminated.
So setting aside Waitrose, Ocado is different to the current offerings from the other supermarkets in that delivers from distribution centres rather then existing stores. This should allow them to be far more efficient at the pick/pack stage (which in store must be very laborious, the Ocado DC has monorails and would be able to be laid out much more efficiently and compact)
But there is of course nothing to stop Tesco et al, who also have a large online customer base doing this too. They have massive funding for new stores and building a few distribution centres wouldn't be a problem. I've seen reported costs of £100m though, so if Ocado has a few of those then that would go some way towards making up the target float price.
rpguk said:
So setting aside Waitrose, Ocado is different to the current offerings from the other supermarkets in that delivers from distribution centres rather then existing stores. This should allow them to be far more efficient at the pick/pack stage (which in store must be very laborious, the Ocado DC has monorails and would be able to be laid out much more efficiently and compact)
But there is of course nothing to stop Tesco et al, who also have a large online customer base doing this too. They have massive funding for new stores and building a few distribution centres wouldn't be a problem. I've seen reported costs of £100m though, so if Ocado has a few of those then that would go some way towards making up the target float price.
Gassing Station | Business | Top of Page | What's New | My Stuff