Internet grocer Ocado branches out

Internet grocer Ocado is planning to branch out into new areas delivering flowers and baby clothes.

The company, which is Britain’s second biggest online grocer behind Tesco.com, delivers approximately 12,500 Waitrose grocery lines and has very quickly built up a base of roughly 200,000 customers, primarily in the South-East and London.

The move to expand into other areas could be seen as an aggressive bid to seize more high-spending shoppers in London and the South-East from Tesco and Sainsbury’s.

However, Ocado’s directors believe that its range (primarily food and drink) is far too limited and restricting its growth and plans to include lines from the supermarket chain’s parent company, John Lewis.

Jonathan Faiman, co-founder and chief technology officer, said we are constrained so we are very excited about growing the range into areas such as health and beauty and babywear – this is a huge opportunity for us.

Ocado has also been considering expanding into other areas such as flowers and magazines but some other lines such as CDs have been ruled out because of the small profit margins.

Ocado directors plan to stick to Waitrose and John Lewis products for the foreseeable future but may consider outsourcing from other suppliers in the long-term.

Ocado announced earlier this week that 2007 had been a good year and expects to move into profit for the first time this year.

The group boosted sales to £10 million in the week to 23 December, up about 25% compared with the same week in 2006.

The group is growing by at least 20% a year and is expected to reach the £500 million mark in 2010. Ocado is one third owned by John Lewis.

Ocado was founded by 3 former bankers in 2002 - Jonathan Faiman, Jason Gissing and Tim Steiner, who all worked for Goldman Sachs. Michael Grade is the Chairman of the company. Ocado is one third owned by John Lewis.

Over £50 million has been invested by the firm in a building in Hertfordshire where around 1,200 workers pack the bags that are distributed as far as Sussex and Manchester.

Expansion plans are underway as far north as Scotland and the Ocado brand may be taken abroad in the future.

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