Ocado: a case study (Ecommerce lecture 4)

Written by: Jonathan Briggs

October 22, 2009 [2819 views]

As this module has progressed I have increased the size and complexity of the sites and businesses we are looking at from micro businesses such as The Market Quarter to high street retailers. Today we will look at Ocado which like Amazon.com is an "internet pure play".

I want students to understand why such stores require massive investment in IT infrastructure and processes in order to deliver what appears to be simply a scaled up version of a Shopify store.

The slides for this lecture can be viewed here: Ocado (2.2 MB)

Having viewed the lecture please consider whether projects like this are now bigger than you expected. Let me know using the comment form below.

Recent comments:

On October 22, 2009 at 9:56 PM, usman wrote:

did Ocado create a Internet Cookie, bcz i will pay ocado and at the same time my pc will heck someone, hecker will also buy something for Ocado, i want ask you about Ocado Cookie, if i will create on my pc then how will be use Card detail if i delate the Cookie.

Jonathan replies: Yes most ecommerce sites use cookies but this simply establish an identity link between one session and another. They don't allow someone else to make a purchase until the customer logs in.

On October 22, 2009 at 10:41 PM, usman Aurangzaib wrote:

if Ocado will give price for something and it will compare at tesco, but at the same time tesco will be sale on those thing and price will be less then Ocado. it will be loss ocado customer, how will i find the regular things price? it will be compare at real time.

Jonathan replies: The check is not real time. The price match guarantee only says that when Ocado looked, this was the price.

On October 22, 2009 at 10:50 PM, Usman Aurangzaib wrote:

how do i come back in payment process? some time i forget card has expired suddenly i realized and i will be come back and do it right but there is an Error says page has been expired, it will be lose some customer.

Jonathan replies: This is not about the page expiring. When your card comes near to its expiry date customer service at Ocado will email you to ask for a new card number.

On October 26, 2009 at 4:39 PM, Amy Farraway wrote:

Hi Jonathan,

Are we not having an activity 4 this week? Or have I just looked straight through it??

I would just like to comment that I would never have estimated that the project would have cost as much as £350 million and Ocado are only NEARLY profitable after 8 years. e-Commerce is very risky!

Jonathan replies: You have looked right past it!

On October 28, 2009 at 12:51 PM, Niral Jani wrote:

Websites such as Ocado are definetely more complex than i would have previously thought. To have 16,500 different products online and having to deal with 75,000 orders a week can be a demanding task. Also with the marketing side,Ocado emails its regular customers with new offers etc will require effecient system infrastructure.
The biggest shock was the amount of money that was invested into the company [£350m over 8 years]. I would have thought a successful company such a Ocado would be profitable from year 1, as it takes over £1m a day, but it is still at a stage where it is only nearly making a profit.
Also it very complicated in the sense that features such a ajax have been used in the shopping cart and also has an iphone app available.
This lecture has made me realise that it is not easy to just open up a website selling things and make money. There is alot of behind the scenes activities that need to be considered before starting out.

On October 28, 2009 at 5:54 PM, Waseem Mughal wrote:

I believe these projects to be bigger than i believed to be. I found out that Ocado being tan online based store has recorded a year-on-year sales hike of more than 30 per cent and set out its vision to become a £3bn business in the UK within 10 years.

On October 28, 2009 at 6:11 PM, Rikky Shah wrote:

With an expenditure of £350m over the last 8 years, i have come to belive that they have turned something small into the biggest only online store service.

On October 28, 2009 at 6:16 PM, Kavita Bhanote wrote:

Projects such as Ocado are bigger than expected because of the huge IT infrastructure and processes over 8 years that are used inorder to get there sites where they are today.

On October 28, 2009 at 10:02 PM, Gurpreet Lamba wrote:

I never realised the amount of orders were so high, at 75000 a week. They have a good system of personal interaction with customers, for example listing their past shopping and recommending other products.

On February 8, 2010 at 4:15 PM, Andrew Paul wrote:

One big question which you dont seem to have addressed: what is the rate of depreciation in the technology over the last 8 years? Did Ocado jump in too early, especially with the arrival of web 2.0?

Jonathan replies: Good question but I think the key technology they invested in was logistics. Web 2.0 is definitely part of their strategy. Thanks for the feedback.