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People often come up with business ideas that are appealing to them but not to the public. Online pharmacies and supermarkets are in that space, says Peter Kelly…

I think the story of Ocado is an interesting one for pharmacy. The company has recently been in the news as it is cutting 1,000 jobs in a cost-saving exercise. 

Ocado is in many ways an extraordinary company. It has a huge turnover, amazing technology and loyal, happy customers but it is not profitable. There is an old saying in business: profit for sanity, turnover for vanity. And Ocado is all vanity.

I love to watch Michael Taylor on social media. Michael has built a real cult following for aesthetically simple videos where he essentially walks in a park, phone held up to take a selfie video and gives his views on a business stocks future outlook.

Sophistication of the analysis

The simplicity of the video belies the sophistication of the analysis. And of course he has made a video of Ocado. In his Ocado video, he tells us it has never made a profit in 25 years.

Only tech companies can get away with raising such large sums of money for so long without posting a profit. Nothing dazzles investors like fancy tech and the dream of a unicorn business that will dominate or monopolises an industry.

He mentions how Ocado was once seen as the “Tesla of groceries” and it was going to disrupt the entire grocery industry. In the video, he mentions how Morrisons supermarket is ditching robots and moving back to store pickers for its online business.

Supermarkets are much more invested in automation and online delivery than pharmacies but it doesn’t really seem to be working well for them.

Technologies have gotten much better and cheaper

The dream of course for investors is that the cost of the robots and technology will fall dramatically, thus making the profits explode but what happens if it doesn’t happen.

Of course, there are cases where technologies have gotten much better and cheaper. Televisions and personal computers spring to mind but I suspect they both had more customers. I believe more people would want to own a television or personal computer than want to have their groceries delivered.

Also, I imagine there was far more competition, far more companies making those products as they are easier to make, than warehouses controlled by robots.

Reading the comments under Taylor’s Ocado videos, it is clear that customers of Ocado love what it offers but would they be willing to pay more for that service in order for Ocado to make a profit? I don’t think so.

According to the BBC, Ocado’s revenue had risen by 12 per cent to £1.36 billion in the year to November 30. However pre-tax losses at its continuing operations widened to £377.6 million compared with a loss of £339.8 million the previous year.

As Michael says in his video, when you are in a growth business, investors are happy to keep investing to watch the business grow but eventually they want some profits and money back otherwise what’s the point. 

Who wants to invest in a business that makes a profit after 100 years when they are already dead! Ocado could be an interesting case story and precursor for the AI businesses.

Ocado has been raising money for 25 years without turning a profit. Will the investors in AI be as patient and prepared to invest for as long. 

Michael concludes his video by asking if Ocado still be around in five years’ time. He states that when you have no profits and no growth, all you have left is a warehouse full of robots that can’t make money.

When online grocery shopping first came on the market, I was very excited about it. I personally hate grocery shopping. I will be honest I hate all types of shopping.

A day out in a shopping centre is a form of punishment for me. I am a very active person who is always looking for ways to claw back more time.

So, I used online grocery shopping but I very quickly found it to be less convenient than going to the supermarket. They gave you a window of time and you just have to wait at home for the time window. It lost me time. 

Now if you are a business owner or a high flying executive and you work from home or you have cleaners and child minders in the house, online grocery delivery is the way to go. You live in the suburbs, fantastic.

But for most people who live in densely populated urban areas it’s not that great and is a bit of a pain. There is a thing in psychology called what I see is all there is.

People often come up with business ideas that are appealing to them but not very appealing to the public at large and I think online pharmacies and supermarkets are in that space.

Great for rich people but not as appealing for poorer people who like going to the shops, meeting people and having a chat.

Peter Kelly is a pharmacist based in London and a stand-up comedian.