Ocado Latches On To Tesco's Prices
Ocado, with a 300 million pound loss on its head has decided to take on the market goliath Tesco by announcing that it is ready to match the prices of around 3500 branded products with Tesco's low pricing in a bid to attract new customers and maybe wean away some of its rivals customers into its stores. Tesco's acidic response was that it was glad to see that Ocado regarded its low prices as a benchmark. However, Ocado, an eight-year-old company has accumulated losses of around 300 million pounds though it claims to be making operating profits, and has only made a 30 million pre-tax loss in the year 2007. This bold or suicidal move, depending on how one sees it, will need another 10 million pounds just to enter into the ring with Tesco. Tesco, one of the biggest supermarket chains in the UK had reported a pre-tax profit of 2.6 billion pounds in the previous year.
Tesco's chief executive office, Sir Terry Leahy had in fact at one time compared Ocado to a charity because of the long time it had taken for them to get into the black. Ocado, is however banking on its excellent service record to make this new bid successful. It has claimed that it controls half the grocery home-shopping market in London and has also planned a marketing blitzkrieg to inform everyone about its lowered rates. So, from 12th March onwards, 'Ocado’s Price Match' will display the slashed prices of around 3500 items out of the 12000 items. According to feedback received from the market, Ocado felt that they were perceived to be too expensive but they felt that from the 12th of March 2008, this impression could be changed.
According to the chief executive of Ocado, Mr. Tim Steiner, "Ocado's Price Match, coupled with our delivery charges, which are the lowest in the industry, will make us accessible to millions of new customers who will be able to enjoy the benefits of a superior service without being penalized on price." Mr. Tim also believed that in addition to this move benefiting new customers, it would also reward their loyal customers, especially in the South of England, where it has a large base. Its partnership with Waitrose, a John Lewis owned company would also benefit if this move succeeds. One of its 3 founders Mr. Jason Gissing said that he wanted to change the impression that Ocado was an expensive retailer. He said that that Ocado could afford to make this bold move and that it would make the prices more transparent and competitive by matching it to Tesco. According to him, his customers wanted to buy 'Pamper's' at Tesco rates and 'Waitrose ready meals' at Waitrose rates and this move to match Tesco's rates would ensure that their customers had a shop, which they could truly love. Fulfilling customers’ needs is very high in Ocado's list as proven by the fact that in the last week itself, out of the 600,000 purchased by its customers, Ocado could not supply only 3 items due to its unavailability.
So, even though not many Industry watchers are laying their bets on Ocado winning the price war, at least customers will now have a choice and that move itself could be the chance that Ocado could be waiting for in order to snap up new customers or Tesco's existing customers straying into its stores. Ocado has been voted the online retailer of the Year and the lowering of its prices to match its rival might just show the market whether it was a brilliant marketing idea or a 10 million pound gamble gone bad.
Article written by: Craig Parker - Make Money Expert |
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