Ocado - Sound investment or flawed business model?

Steve

I am always amazed how some business are run at a loss (sometimes for tax reasons - which I can understand) however many business are valued on turnover rather than profit.

A company may turnover millions and only make thousands - is it worth it?

I must admit when Ocado first started out I thought it stood a chance because Waitrose didn't offer a delivery service but now they do. Also, Waitrose have now scrapped the delivery charge.

The John Lewis Partnership own Waitrose and yet it has a stake in Ocado (not sure how much) so I do struggle to understand how the business model can work without cannibalising it's own delivery service....

Yup agree, its the well worn "turnover is vanity - profit is sanity". Maybe some companies just love overhead?

What happened to start small, make profit, replicate and controlled growth. Now it seems to be all or nothing.

With you there! Absolutely no idea why there is a separate brand delivering Waitrose food, has always seemed mad.

This is a classic IPO "scam" in which the investment banks regularly take part.

The business model does not work for the retail investor.

It primarily works for the founders and orginal investors and maybe some of the institutional investors. And of course the banks take their significant fee, which is set aside.

But off the back of the retail investor. And some dumber institutions in charge by decision-makers in awe of the "investment bank aura."

This statement is far truer than you will possibly be able to imagine.

lol, so is this personal experience or just a born cynic? Must admit, if its ever time to float, then its time cash in those shares and leg it

Welcome to the forums by the way, with the healthy cynicism detected in your other posts, I'm looking forward to some interesting threads

It's amazing the number of times when one speaks reality, plainly, the truth, the obvious etc...that one is accused of cynicism.

These are not even opionions, if you analyse the business model from any intelligent perspective (for example, from the POV of the original angel / venture investors) then you can quickly and logically reason the business model. In the case of the original angel / venture investors, the exit strategy is (often) IPO. In the case of the investment banks, it is the fees for IPOing and bringing all those institutions and HNWIs (High Net Worth Individuals) to the table / deal.

I could go into this in more detail but I shouldn't need to on a "business" forum.

I don't know, its pretty interesting stuff. We don't have too many IPO deals on these boards, and the majority of members are either new startups or smaller businesses.

Deemed small fry and backbedroom by some, salvation of the economy by others, exit strategies for small business tends to be left behind until the hand of the investment angel comes along.

Its nice to get a viewpoint from the world of big business.