A near-3% contraction in average order size and a slowdown in final quarter sales leaves online supermarket Ocado (OCDO) trading 4% easier at 266.7p.

Margins are being squeezed with customers spending less per order, while the continued absence of a long-promised deal with an international retailer for the Ocado Smart Platform also leaves a sour taste.

Click here to view Ocado's trading statement covering the final quarter of the year to 27 November. The Hatfield-headquartered concern's retail sales, generated via Ocado.com, online pet store Fetch, the kitchen and dining store Sizzle and Fabled, a high-end beauty store run in partnership with Marie Claire, grew 13.1% to £398.1m. This suggests a slowdown, since sales for the year as a whole rose 13.6% to over £1.267bn.

Gross sales, including business with online partner Morrisons (MRW), grew 14.5% to £436.8m, while average orders per week were 17.6% ahead at 241,000.

However, CEO Tim Steiner blames continued industry-wide price deflation and 'further take up of the Ocado “Smart Pass”', the latter driving more frequent shopping by customers, for a 2.9% decline in the Q4 average order size to £105.61.

Yet in June's half year results statement, Steiner explained: 'Our bundled customer benefit membership scheme, Ocado Smart Pass, which includes free delivery, continued to be popular with over half of sales coming from customers with a pass and an overall strong growth in Smart Pass members. Membership helps to drive customer loyalty, shopping frequency and ultimately total spend per customer.'

In September, Ocado also reported a 3.4% decline in third quarter average order size to £107.94, so it appears basket sizes have already peaked in a cut-throat groceries market with far too much capacity.

As Neil Wilson at ETX Capital comments: 'Ocado will need sharp elbows in this competitive space. It’s got fight on its hands with Amazon’s online offering. Until now Ocado has been working alongside supermarkets, but Amazon Fresh is a direct pure-play competitor. Morrisons, which works with Ocado, also seems to be getting cosier with Amazon, which is another worry for the picker, packer and deliverer.'

Wilson adds: 'Meanwhile Ocado has again failed to announce a major deal with a foreign retailer, which it’s been promising for several quarters now. If Ocado lacks the muscle to expand on its own, it could become a takeover target itself. The likes of Wal-Mart-owned Asda or Amazon could come knocking.'

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