In conversation with Tim Steiner OBE, Ocado CEO. Covid-19 and the changing face of retail

In conversation with Tim Steiner OBE, Ocado CEO. Covid-19 and the changing face of retail

01.06.20

Tulchan Frameworks, hosted by James Harding, Co-founder and Editor, Tortoise Media, in conversation wwith Tim Steiner OBE, Ocado CEO.

On the day that the Prime Minister appeared before the Commons liaison committee and the Government unveiled more of its ‘test and trace strategy’, the conversation focused on the experience of the retail sector during the pandemic and the lessons for the future.

The Prime Minister’s statement on March 23

Boris Johnson’s announcement of lockdown was a transformative moment. At its beginning there were 80,000 people queuing on Ocado. By the end, there were 300,000 – and every delivery slot for three weeks was allocated.

Consumption trends

Even before lockdown, consumers were stockpiling long-life products such as pasta, tinned goods and canned tuna, and - of course - toilet roll. There was also a surge in demand for cleaning products, as consciousness of the need for hygiene rose in the first phase of the pandemic. More recently, there have been increased sales in fresh foods, and a suggestion that more people are entertaining at home.

The Great British Bake-in

The surge in demand for flour, eggs and sugar indicates a passion for baking during lockdown. Panic-buying has been replaced by a desire to spend time in the kitchen learning new skills.

Broader trends

Ocado has many older customers and young families among its customers. In recent years a number of clear trends have emerged: away from fizzy carbonated drinks to fruit juices and smoothies - which, because they are high in natural sugar, are now losing out to flavoured water products. Organic and high-protein goods are increasingly popular. Products high in corn syrup are falling out of favour.

Retail shifts

There has been a series of ‘channel shifts’ - from high street to supermarket to out-of-town hypermarket. The move to online shopping is striking for two reasons: first, it requires no physical involvement by the customer. Second, the emergence of the automated warehouse and the rise of advanced robotics mean that fewer employees than ever are required to complete transactions. Digital platforms now account for 13 percent of grocery sales, up from seven per cent before Covid-19. Arguably, a decade of change has been accelerated into a few dramatic weeks.

Do physical stores have a future?

For now. But the pandemic means that they are losing advantages such as enabling customers to try on clothes. Even that advantage is under long-term threat as ‘virtual mannequins’ permit shoppers to see digitally if a garment will fit them.

‘Risk budgets’

The unwinding of lockdown will confront every individual with a choice - how do they want to ‘spend’ the ‘risk budget’ that they will inevitably be handed. Would they prefer to spend it at a physical shop - or seeing friends, or going to the cinema (whatever that entails in the new landscape)? Many will prefer not to take the risk of going to a busy supermarket.

Public health

Significant issue for online retailers. Pre-checkout reminders to customers that there are healthier, less calorific options are taken up at ten times the rate of similar alerts to the availability of cheaper products - but such interventions also generate complaints from customers who regard this kind of information service as impertinent and intrusive.