Case study: Ocado
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Ocado has a branding job to do unlike that of perhaps any other retailer. Not only does it have the task of positioning itself as an online-only business against supermarkets that have a large and visible presence in towns, it must also differentiate itself from Waitrose – the brand that supplies the majority of its products, but against which it also increasingly competes.
Selling many of the same goods as Waitrose, Ocado predictably takes on many of the same assumptions about the price and quality of its products. It is seen by consumers as 7.1% more expensive than the average grocery retailer, but Ocado is still thought less expensive than Waitrose (8.1% higher than average), while its actual prices are slightly higher than the perception, according to OC&C’s research.
As Ocado head of retail Jon Rudoe points out, the two businesses are independent and therefore independently set their prices. “We recognise we have a different shopper and ours is a different shopping experience from Waitrose, and as such price may be different. Our average transaction value is over £100. The average transaction value in most stores is in the low tens of pounds.
“People are shopping in a different way on a different occasion. Our shopper tends to be slightly younger than the Waitrose shopper, probably with children, possibly at a stage of life when they are perhaps a little more penny-pinching.”
In spite of this, prices of many products offered on the two brands’ websites are identical. It remains to be seen whether this will change significantly in July, when the contractual embargo that prevents Waitrose from offering online delivery services in Ocado’s main London market expires.
Despite an upmarket positioning, Ocado does make an effort to compete against other supermarkets on price, particularly with its Tesco Price Match. The retailer sets the prices of about 8,000 product lines to match those of the market leader. Rudoe says the initiative was the result of a decision to invest in reducing prices, rather than in marketing on price.
“The Tesco Price Match scheme is something we have done very little marketing for because it is so easy to explain to a customer. You can see it and you know what it means. We literally launched the scheme by writing an email to our customers, saying that as of today this is what we are doing.”
