Morrisons in talks with Ocado for launch of online food operation in 2014

Morrisons: online push

Morrisons: online push

Morrisons plans to launch its first online food operation in 2014 and is in talks with Ocado to help deliver the offer.

The announcement to sell food online accompanied Morrisons’ results for the last 12 months. In the year to 3 February 2013, the retailer suffered a 2.1% fall in like-for-like sales and a 7.2% drop in pre-tax profits to £879m.

Dalton Philips, chief executive, said: “The sustained pressure on consumer spending was reflected in our like-for-like sales performance, which was not as good as it should have been. We have implemented a range of measures to address this and are making good progress in improving our promotional effectiveness and in communicating our points of difference. Recent events have underlined why it’s so important that we tell our customers how and why we’re different and what our vertical integration really means for them. Food quality, provenance and the issue of trust are at the forefront of consumers’ minds and these are all areas where Morrisons has something genuinely different to offer.

“We continue to invest for the long term success of our business. Our fresh format offer is now in over 100 stores nationwide and we will continue to tailor the concept as we expand the rollout during the coming year. We are ready to accelerate the development of our multi-channel presence and our convenience operation is gaining real momentum acquiring over 60 new sites in recent weeks alone. We are therefore increasing our target for store openings in the coming year by 40% and now plan to have 100 stores trading by the end of the year.      

“Today’s announcement that we are launching an online food offer in 2014 is another important step in Morrisons strategy of being ‘Different and Better than Ever’. We may be a late entrant to the online food market but we have learnt from our involvement with Kiddicare and Fresh Direct. We have long been a leader in fresh food and our craft skills and vertical integration really set us apart from the competition. Ensuring that these points of difference translate into our online food offer will be a priority.” 

Morrisons: Fresh Direct stake

Bryan Roberts, Kantar Retail’s director of retail insights, said: “We’ve been predicting a tie-up between Morrisons and Ocado for some time now.

“Morrisons knows that cracking online grocery by 2014 with ‘home-made’ tech will be difficult and fast-tracking on the back of Ocado’s expertise will be incredibly beneficial.

“Morrisons has learned from its investment in US business Fresh Direct, and the retailer sounds confident that it has found a way to replicate its fantastic credentials in fresh and prepared foods in an online environment.

“There is speculation that their immediate forays into online retailing will involve a couple of ‘dark stores’ and perhaps some piggybacking on Ocado’s two customer fulfillment centres, but in the long term they will likely turn to a combination of store-picking, click & collect and bespoke warehouses/commissaries.”

In tandem with the online push, Morrisons is ramping up its presence in convenience stores. It has opened its first convenience stores in London and accelerated its store targets for 2013/2014 with the acquisition of stores from Jessops, HMV and Blockbuster. The 12 M local convenience stores which are already trading are reported to be performing well. 

Roberts said: “Elsewhere, convenience stores are on track, boosted by recent real estate gains from non-food retailers, and will be supported by extra dedicated distribution space, perhaps confirming that the ‘hub & spoke’ model – supplying convenience stores from supermarkets – is not sustainable. The private label overhaul is progressing well with a resultant increase in participation and the store refurbishment programme continues to generate positive results, although there are likely to be further tweaks to the nature of the roll-out to make it less costly and more effective. 

“In summary: better late than never in convenience stores and online; must try harder in delivering and communicating promotional relevance; and keep up the good work on stores and range.”