How do you solve a problem like Ocado?

Posted by Chris Green on Wednesday March 24 @ 10:09 pm

For the last few months we’ve been experimenting with online grocery ordering with Ocado. We say experimenting as the whole saga has been far from a convenient, pain-free and polished service. Rather it’s been like using a buggy early beta release of a piece of software.

For those who do not use or know about Ocado, let me explain the origins. Ocado is an online grocery firm that resells the usual name brand items, along with its own small range of own-brand goods and a vast selection of own-brand goods from upmarket supermarket chain Waitrose. One of the original investors in Ocado was John Lewis, parent company of Waitrose (hence the link-up). The John Lewis stake in Ocado is now controlled by the John Lewis Pension Fund.

In our fairly short tenure as a customer we’ve had over a dozen deliveries. We’ve also had an unprecedented reoccurring problem with goods turning up damaged. We’ve even had an incident where fresh fruit arrived so mouldy, some items had already turned to mulch, plus a couple of incidents of bakery goods turning up completely stale and a few items that never turned up at all (but remained on the bill). Around £80 of food and non-food items have been compromised across our dozen-or-so deliveries to date. It’s a large amount of money to have to refund to one customer, and can’t be helping Ocado’s bottom line. It is also problematic as it undermines the main point of online grocery ordering – we buy online and have it delivered to our home so we don’t have to go to the store (for various reasons we rarely have time anymore). Yet with the high degree of damaged goods, we still end up regularly hitting a traditional supermarket to replace damaged, missing or otherwise compromised items.

We would like to add at this point that this blog post is in no way intended as an effort to solicit any form of additional compensation, free gift or inducement from Ocado. In each incident of damaged or otherwise unusable goods, Ocado’s customer service department has always responded quickly and courteously, and has always offered a sensible resolution to the problem at the time, be that a refund or replacement. However, the repeated problems suggest that our past feedback hasn’t filtered through from front-line customer services to the people who need to know (and who can make changes to solve potentially systemic quality and product damage issues).

Instead, this blog post is intended as an attempt to offer detailed, constructive business feedback to Ocado on what is and isn’t working in our individual experience so that improvements can be made and the good stuff continued. We are also doing this in public so that others can learn from our experiences and to stimulate sensible discussion about online grocery shopping in general. However, we would like to avoid a repeat of a recent incident on Ocado’s Facebook page, where we tried to offer up some honest and constructive feedback on a small issue and our post was immediately hijacked by a small group of ‘fans’ who seemed unable to cope with the idea that someone’s Ocado experience was less than perfect and proceeded to carry out the internet equivalent of a public stoning. While I am delighted to find that someone somewhere is receiving the Ocado experience I would dearly love myself, to blindly accuse others of lying about their own, lesser experience of the company is childish at best.

This post is a realistic account based on our personal experience alone. Your experience of Ocado may well differ, and may well be far better than our experience. In which case we envy you, and would dearly love to have your delivery driver or drivers cover our area. It does not mean our account is not an accurate one. Sadly, it is. But it can be made better! That is what we want to achieve here. Ocado, we hope you see this. Our first delivery from Ocado, and the driver who brought it was fantastic. It went rapidly downhill from there. We want the first-delivery Ocado experience back and we know Ocado can and wants to reproduce it. We are also happy to work with Ocado to try and find out what’s going wrong so it can be rectified.

We really like the Ocado philosophy and business model (and the food it sells), and really want the company to succeed. Ocado is a great example of British business innovation and it fulfils a clear need in the marketplace. When the process works, it works incredibly well (not to mention that it fits my lifestyle perfectly, when it works). What seems to be lacking, based on our personal experience, is consistency and reliability.

Supermarket home delivery is a booming business in the UK right now. The current crop of services started in the late 90s when frozen food retailer Iceland launched a pure delivery-only service (you still had to go to the shop and pick your own goods and go through the till, but a man in a van would then deliver the items to your home – great for people without a car); a bit like Ikea, but for food.

Others soon followed and the likes of Tesco, Asda and Sainsbury’s now all offer online ordering and home delivery of groceries for a nominal fee. Then there’s Ocado.

Founded in 2002 by a group of ex-Goldman Sachs bankers, Ocado set out to do things better, which meant doing some things differently. Being the first new supermarket to enter the crowded UK grocery market in a generation was never going to be an easy task, so the Ocado proposition had to be both compelling and eye-catching to attract customer interest, and it is.

Ocado is the only 100% internet-based grocery retailer in the UK. As such it differs significantly from the established bricks & mortar retailers in terms of how it goes from initial order to front door delivery.

The Tesco, Asda and Sainsbury online ordering and delivery services all work on the basis of your internet order being passed to your local store, where a staff member wanders the aisles selecting the items you requested from the shelves and choosing alternatives for items that are out of stock. These items are then packed in bags and crates before being handed off to a van driver for delivery to the customer’s home or other nominated address. On delivery, the customer can then opt to reject inappropriate or unwanted substitution items, damaged or poor quality goods.

There are obvious benefits to this approach. It retains the ‘local’ aspect of the interaction between retailer and customer. It also maintains a level of continuity and familiarity between delivery drivers and customers, building up trust and confidence in the service if deliveries are done well. For the retailer, it keeps costs down as they can leverage existing stock, supermarkets and in some cases staff, minimising cost exposure and allowing the service to operate on fairly low minimum spends and delivery charges while still making a profit or breaking even.

Ocado takes a very different and more centralised approach. Orders are placed online and are fulfilled from a single warehouse regardless of where the delivery address is (Note: Ocado does not yet have nationwide coverage, with coverage focussed largely on the South, South East, North West and Midlands, but still expanding).

Ocado has built a purpose-built, semi-automated picking and packing facility in Hatfield that can only be described as a work of complete genius. Plastic crates are filled with carrier bags (three bags fit into one crate), the crates are bar-coded and assigned to each order. The crates then zip around the warehouse on conveyor belts and slides in a manner not too dissimilar to how your luggage is routed around the bowels of an airport. Along the way the crates stop off at the various aisles where your chosen goods are located. Members of staff in each aisle pick the items you require off the shelf, pop them into the bags in the crates, log they’ve done it on the computer system and send the crate back on its journey.

The computer system provides suggestions to the pickers on alternative items if something is out of stock, helping to reduce the number of inappropriate or illogical substitution choices. Furthermore, by centralising the stock and the picking in one place, and not having to compete with in-person shoppers for the stock on the shelves, Ocado has a massive advantage over the established supermarkets – it can more accurately manage and report stock availability at the time the order is placed, taking into account when the order is scheduled for delivery.

Centralisation, paired with very effective customer relationship management (CRM), order processing and stock control systems means that the company knows exactly how much of an item it has in stock, its sell-by date, when the next delivery is due in, how many orders there are for that item and when they are due to be delivered. As well as having hard data on availability vs demand, the company can make pretty accurate predictions on future demand based on historical data and sales trends, allowing it to order quantities more accurately to service expected future demand, while minimising waste from items going out-of-date and unsold on the shelves. The approach also lends itself well to just-in-time ordering, meaning that Ocado doesn’t always have to stock and store goods in massive bulk, goods can stay at the supplier until they are actually needed on-site at Ocado’s Hatfield warehouse. There are also significant operational, purchasing and staffing economies of scale associated with the single central warehouse model.

Once all your items have been picked and packed, the crates reunite at the end of the process, where they are loaded onto a van and shipped off for delivery by one of Ocado’s army of delivery drivers, using a massive fleet of custom-built Mercedes-Benz refrigerated delivery vans, painted in an array of bright colours. Most even have names – my last order was delivered in a van called Laura Lemon, the order prior to that was delivered in a van called Kai Cabbage.

Last year (2009) Ocado enjoyed significant growth in customers, sales and turnover – including a bumper Christmas – and continued to expand its fleet of vans and drivers. It has also continued to expand its network of satellite distribution centres. In order to expand Ocado’s coverage area, but retain the single warehouse concept, Ocado has opened a number of satellite distribution points to enable it to reach into additional regions. Rather than load all its delivery vans at Hatfield before setting out around the country, orders destined for an area covered by one of these satellite distribution centres are picked and packed as normal in Hatfield, before being transferred en-masse via a large lorry to the satellite centre. There, the crates containing the shopping are transferred to the smaller delivery vans, which in turn deliver the goods to the customer’s home.

As a customer that appears to be served from one of these satellite depots, rather than direct from Hatfield, we think this is where the Ocado experience might be starting to break down.

Maybe it is the additional journey and transfer process that our shopping goes through (being moved by large lorry from Hatfield to White City, then being reloaded onto a small van) that is causing so much stuff to be damaged? Maybe it’s a mechanical problem within the Hatfield fulfilment centre? Or maybe it’s down to aggressive handling by the drivers or the original pickers and packers?

As a customer, ultimately we do not know where the problem is, and don’t really care, as the mechanics of Ocado’s process should be transparent to the customer. What we do care about is getting the problems worked out of the system so that we can obtain a reliable flow of undamaged deliveries from Ocado for a long time to come.

Issues such as rotten fruit and stale baked goods seem easier to determine. That problem stems either from the supplier, or that these perishable goods are not being stored properly in Hatfield. It is also possible that Ocado’s stock control processes are failing and these items are hanging around for too long. Storage problems seem more likely, but we are purely guessing as to exactly which of these is the actual cause.

Another area of concern is the delivery drivers. Again, it is hard to identify the root cause for what we are about to say (and would appreciate not going through another public stoning), but by-and-large the drivers that have delivered to our home, with the exception of our very first delivery, have been pretty awful. Maybe it is because the drivers are based at a satellite depot and thus don’t feel like part of the Ocado corporate family and don’t subscribe to the philosophy? Perhaps the satellite depot structure has created malaise leading to less oversight and monitoring, higher staff turnover, less training and less overall enforcement of standards and expectations of the delivery drivers?

We have had drivers that have man-handled goods, drivers who could not speak English, drivers that turned up at the wrong time without warning, drivers who refused to wait for a few seconds while we checked for broken fragile goods (really, we realise you have other deliveries to make, but there’s no need to rush a delivery like it’s a Formula 1 pit stop – no wonder things keep getting damaged), and drivers who continually refuse to take the old Ocado carrier bags away for recycling (a significant differentiator of the Ocado experience is its commitment to recycling the many carrier bags it uses to pack the shopping in).

Sure, the bags are bio-degradable so dumping them in the rubbish isn’t so bad, but when part of the Ocado delivery service (which can cost up to £6.49 for a single delivery) is to take away the Ocado bags from the previous delivery, it is frustrating when it doesn’t happen. Especially when you have made the effort to hand the bags to the driver and he still manages to put them down and leave without them. We are not the most eco-conscious people in the world, but try to do our bit and even we know it’s wasteful to dump something like a carrier bag into landfill when the grocery delivery service is supposed to reprocess and remanufacture them. Again, we don’t know why so many of the drivers we’ve had are reluctant to take the Ocado carrier bags away, but in our experience, many are.

To be clear, especially to the Facebook lunatics, we are referring only to the drivers that have delivered to our home. We cannot comment on drivers that have never delivered to us and do not wish to tar all Ocado drivers with the same brush. We would hope that the vast majority of Ocado drivers are like our first driver – polite, careful, considerate, helpful and most important, passionate about their job. The guy really cared about doing a good job and ensuring the customer was happy, taking extra time to talk new customers through every little detail. It is good customer service you seldom see anymore and it’s good to know it’s alive and well somewhere within Ocado. It is the sort of service that makes us want to be loyal customers, and perhaps it is the pursuit of that service again that has led us to be so patient and to persevere for so long with Ocado.

Alas, that perseverance may be coming to an end. Our delivery experiences have been a challenge, while the juvenile reaction to our Facebook feedback has sadly left us with a very negative view of Ocado – particularly given its failure to police its own Facebook page and its encouragement of the mob of immature individuals hurling abuse and unsubstantiated (and quite frankly criminal) accusations.

Also, we are currently trialling Ocado’s Delivery Pass deal. This is another excellent Ocado service innovation, whereby for a monthly subscription fee (or annual payment), you incur no individual delivery charges, regardless of when you opt for delivery. It also means you can order as little as £40 of goods (orders between £40 and £65 usually carry an additional delivery surcharge when paying for individual deliveries), which again suits our needs well as a weekly Ocado shop of around £45-£50 pretty much covers our grocery needs.

We began a one month free trial of Delivery Pass back at the beginning of March, and have had three deliveries in that time. So far, one delivery had nearly £20 of damaged and missing items (including a badly damaged frying pan), and the two most recent deliveries had no product problems at all (though on both occasions the driver left behind our carrier bags having been handed them). What is likely to be our final order of the trial is coming this Saturday, and it is this delivery that will determine whether we commit to the 12-month minimum Delivery Pass contract or walk away, perhaps completely, from Ocado.

The thing is we really want to continue as an Ocado customer and as a Delivery Pass subscriber. However, there is an obvious reluctance to commit to a 12-month minimum term if we are going to have to spend time every delivery logging claims for damaged goods, and paying £9.99 a month for the privilege of chasing down refunds and replacing damaged items. With all the problems we’ve had so far, and the fact that in four months we’ve only had two consecutive deliveries without damaged goods, our patience is wearing thin and we are starting to resign ourselves to the fact that we’ll have to trawl around a traditional supermarket – sadly not a Waitrose – again instead of having quality produce delivered to our door by Ocado.

So we say this in closing – Ocado, we are loyal and committed customers that want to support your business and spend money with you, so please don’t ignore our feedback and instead show us the same level of commitment we are showing you. Please sort it out; please retain us as a customer!

Full disclosure: Prior to becoming a journalist I worked in the grocery retail industry. I also advised WebVan, a dot com-era grocery delivery service in the US on media issues.

52 Responses to “How do you solve a problem like Ocado?”

  1. Valerie says:

    I had a job interview at Ocado today.
    In the end I declined the job offer.
    The pay is exceptionally poor.

    No wonder staff are unmotivated.

  2. lewis says:

    I work for ocado…the pay is below average.

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