US Edition 
Supermarkets must choose between profits or customers, Ocado warns
Ocado claims that pressure on supermarkets is growing as sales clear £1bn for the online grocer
Traditional supermarkets face a dramatic choice between lower profits or a worse offer for customers at they attempt to adjust to a change in shopping habits, according to online grocer Ocado.
Duncan Tatton-Brown, chief financial officer of Ocado, said the company was “not sitting here smug at all” as Tesco implodes and its rivals Asda, J Sainsbury and Wm Morrison battle falling sales.
Ocado, which was founded in 2000, confirmed in a trading update that annual sales have gone through £1bn for the first time. Sales in the 52 weeks to November 30 rose 20.4pc year-on-year to £1.03bn for the online food retailer.
This performance puts Ocado on course to record its first ever annual profit, with its earnings also boosted by a tie-up with Morrisons. Shares in Ocado rose 21.40, or 6.4pc, to 355.40p following the update.
However, the company’s strategy remains under scrutiny in the City. Shares in Ocado are down by a fifth in 2014 and the retailer’s sales growth slowed during the year, with the average order size down 1.7pc in the 16 weeks to November 30.
Nonetheless, Mr Tatton-Brown said: “I much prefer to be where we are then to be on other side of the fence, where they are suffering with a large store estate and would prefer not to have as much.”
He added: “This is not something that happened overnight. Our message has been the same for years. We are going through a transition [in shopping habits]. The transition creates a virtuous circle for online retailers – we get more and more efficient as we scale our business.
“At the same time, the supermarkets are losing sales and can't change their cost structure – that either effects their profitability or their proposition.
“We have been saying that for years. It has been played out in the last six to seven months.”
Mr Tatton-Brown said the drop in Ocado’s average order size was due to customers placing orders more regularly and also the increasing use of the company’s specialist sites, such as pet store Fetch.
“Customer are shopping more frequently, so spending goes up but the average order size goes down,” he add.
In recent weeks, Ocado has also begun trialling a click-and-collect service at five sites, but Mr Tatton-Brown said it was too early to comment on whether the company would roll out collection points for online orders across the UK.