Stock markets have suffered a heavy blow over the last few months. The Covid-19 pandemic has ripped through the global economy. The virus continues to disrupt supply chains and weaken consumer demand.
In the midst of this turmoil, online grocery retailers have experienced an explosion in demand for home delivery services. This comes as a result of more people staying inside and ordering deliveries to their homes during the pandemic.
Innovative online shopping
One company supplying this service is Ocado (LSE: OCDO). Describing itself as “the world’s largest dedicated online grocery retailer”, the supermarket has no physical stores. On top of this, all home deliveries are completed from its state-of-the-art warehouses.
Investors should recognise the potential for a long-term change in shopping habits as a result of the virus. As more people use the online home delivery services that are available, more people may see the attractiveness of such a service.
Ocado is well set to benefit from any such changes. The company has cemented its position as a leading global provider of technology for internet-based grocery shopping. Its focus on warehouse robotics and home-delivery technology is an attractive prospect for continued growth in the future.
Strong financial performance
In a recent trading statement, the company reported growth in retail revenue of 10.3%. Additionally, the company experienced a 10.2% increase in average orders per week over 2019.
The report highlighted that however the coronavirus unfolds, the fundamentals at Ocado are strong. A double-digit increase in customer orders helps illustrate this and underscores the profitability of the business model.
Considering the fact that people still need to eat, it is to see why Ocado is the only company in the FTSE 100 index to rise this year. Last week’s gain of around 9%, against a slump of more than 30% for the index, can be attributed to recognition that the company is set to benefit from increasing demand for home deliveries. That said, the share price has taken a hit over the last few days.
The future of grocery shopping?
Regardless of the lasting impact of Covid-19 on shopping habits, I believe Ocado’s business strategy is set to prosper in the future. With 95% of deliveries arriving on time and 99% of orders accurate, Ocado’s model is highly efficient and provides a promising platform for growth.
Arguably, the company is transforming grocery shopping. More and more customers are flocking to take advantage of Ocado’s services, especially in light of current circumstances. The retention of these customers provides further scope to expand operations and build up a strong consumer base.
For me, the recent gain against the backdrop of a wider decrease in the index is not the primary reason investors should consider shares in Ocado. With a multitude of opportunities to grow and scale the business, I believe the company has the prospect of harnessing technology in order to change the future of grocery shopping and reward investors in the process.
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Matthew Dumigan has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.