Ocado Ltd.'s Grocery Strategy

I've always had a special affection for the grocery business. Perhaps it's because my second job, as a teenager, was working for Matarelli's Grocery in Peoria Heights, Illinois.

Matarelli's was a literal corner grocer. Situated across from the Pabst Brewery, it received a steady stream of shift workers buying food for lunch, as well as many upscale housewives dropping off shopping lists or picking up orders.

The store was run by two elderly Italian spinsters, and their brother. It was a great job for many reasons. Their management style was decidedly "Theory Y," working us hard but fairly. If you knew to ask not, "may I go home now," but, "do you have more work for me to do," the sisters would send you home early, but pay you until closing.

They hired two delivery boys each year, with the job passing down to two new seniors at the Catholic high school I attended. If you happened to know the prior two guys, you had a decent shot at this dream job.

Working at Matarellis meant alternating weekends and working half the after-school afternoons during the school year. In summer, it was alternate weeks. We stocked shelves, carried orders to cars, stored the weekly distributor's massive deliveries, drove to pick up produce, and, best of all, drove the store's station wagon on deliveries.

This last part was, by far, the best aspect of the job. As a 16 year-old, we were being paid to drive someone else's car up to three times per day. The tips were fantastic, and I learned a lot about people's daily lives, as we were in so many kitchens on delivery runs.

Thus, I was fascinated by Tuesday's Wall Street Journal piece concerning UK grocer Ocado.

Though it initially looks similar to the failed San Francisco grocer, Webvan, founded and run so ineptly by some former Andersen Consulting execs years ago, Ocado seems to be better-grounded in customer needs.

The article notes that the firm does very well in Britain because of the country's bad weather, limited parking and ubiquity of high-speed internet access.

The company invested in proprietary warehouse picking systems, virtually automating the order-assembly process. This is very much more advanced, but along the lines of a concept a colleague and I had a few decades ago, when we worked together at Chase Manhattan Bank.

Now, however, online orders make the customer's side of the process easier and cheaper. Ocada has made great strides on its side, as well.

The Journal article concludes by comparing Ocada with its US counterpart, Freshdirect. When I noticed former Citigroup EVP, Lotus and Priceline CEO Rick Braddock is now the latter's CEO, it made me even more confident this business has finally arrived.

Both Braddock and the finance chief at Ocada stress sustainable profitability now, not merely logistical skills. It may take a little time, but one can't but help think this is a trend that we'll see more of in the future.