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The jury’s still out on Ocado

The grocery game has been dominated by local stores, high street chains, out-of-town hypermarkets and now online supermarkets – but will they ever make a decent return?

Any decade now, we’ll make a profit. That wasn’t quite how Tim Steiner, co-founder, chief executive and driving force of Ocado, put it – but you get the gist: in its 10th year of operation, the online grocer recorded another pre-tax loss (of £2.4m) but restated its confidence that the grand vision remains intact. Steiner hailed “the emporium of groceries that we are becoming”.

If you ignore the miserable financial returns to date, you can see what he means. Among Steiner’s blizzard of statistics, the most impressive was this: by the end of the year, Ocado plans to be selling 31,000 products, or SKUs (shop-keeping units) in the jargon. That’s more than a Tesco hypermarket offers. There’s a price match on 7,000 Tesco lines and, despite last year’s hiccups at the Hatfield distribution depot, Ocado’s record of on-time delivery of orders is good.

The way Steiner tells it, we’re in the midst of another “channel shift” in the grocery game. The pre-1950s local stores with limited ranges and high prices were followed by high street chains. Then came out-of-town hypermarkets, and now online supermarkets. As a forecaster, he may turn out to be correct. The pressing question for shareholders, however, is whether Ocado can make a decent financial return from this shifting landscape.

The short answer is: come back in 18 months. By then, Ocado will have opened its second giant warehouse, at a cost of £215m. If it can manage that transition without further logistical cock-ups, it would become possible to believe the promise that size will yield financial benefits. Until then, though, the jury remains out. © 2012 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds