Ocado - comment

The FT article on the Ocado/Kroger CFC closures fleshes out a few interesting points. We still expect CFCs to be the major part of the online solution. They are the most efficient way to fulfil orders, but the upfront expense is large, making customer acquisition costs high.

Instant delivery will be part of the future online fulfilment market. DoorDash (who own Deliveroo) is generating free cash flow. The fulfilment costs are borne by the App and passed on to customers via charges. For infill orders, there will be customer willingness to incur fees, but we are still sceptical that this will replace the larger weekly shops.

CFCs need to be in densely populated areas. The placement of the CFC is down to the customer rather than Ocado. Also, each CFC is a significant capital investment, so Ocado may need to be more active in guiding its customers.

https://www.ft.com/content/ffacb579-ecf4-48b5-9a5a-ad786d74f9e1