Debate Magazine

Ocado - Fun With Numbers

Posted on the 16 March 2016 by Markwadsworth @Mark_Wadsworth

From Reuters:
LONDON, Sept 11 British online grocer Ocado reported gross retail sales rose 15.5 percent in its fiscal third quarter but average order size fell as competition increased in the business.

Gross sales rose to 218.5 million pounds ($354 million) in the 12 weeks to Aug. 10, compared with a rise of 15.6 percent in the first half, while average order size fell 1.7 percent to 111.64 pounds.

So what if the average order size fell? Stick those numbers in a spreadsheet and work backwards, you could say that Ocado has increased sales by 29,000 and the average order size of these incremental additional sales is £100.
This might well be an example of price skimming, i.e. early customers are prepared to place larger orders, so if Ocado then drops its delivery charges, it can gain additional customers for whom it is worthwhile placing larger orders. As long as the new smaller orders are still profitable, then good for Ocado.
On a related note, Her Indoors mentioned recently that Tesco have higher delivery charges depending for more convenient delivery times. My son (who is good as spotting these things) pointed out that this was just like airline tickets - very early and very late flights are much cheaper. I inevitably added that this was a pure rental charge.

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