Morrisons to enter supply arrangement with Amazon

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Morrisons and Amazon are today announcing a new supply agreement. In the coming months, hundreds of Morrisons products will be available to Amazon Prime Now and Amazon Pantry customers. Morrisons will provide a wholesale supply service to Amazon, allowing Amazon’s customers access to a wide range of Morrisons ambient, fresh and frozen products.

Morrisons said it was focused on its six priorities to make its supermarkets strong again. In addition, it said it has an opportunity to build a broader business that complements its supermarkets and is consistent with its commitment to pursue capital light growth. Wholesale supply enables this by growing volumes and leveraging the compoany’s manufacturing, distribution and wholesale capabilities.

David Potts, Morrisons chief executive, said: “Today’s agreement is built on Morrisons unique strengths as a food maker. The combination of our fresh food expertise with Amazon’s online and logistics capabilities is compelling.

“This is a low risk and capital light wholesale supply arrangement that demonstrates the opportunity we have to become a broader business. We look forward to working with Amazon to develop and grow this partnership over the coming months.”

In addition, Morrisons said it has been in discussions with Ocado to grow and an agreement in principle has been reached. This involves Morrisons taking space in Ocado’s new Customer Fulfilment Centre (“CFC”) in Erith, and Ocado delivering a store pick solution for Morrisons that leverages Ocado’s technology and Morrisons store assets. When implemented, this would enable, working with Ocado, to sell to customers all over Great Britain.

Morrisons said this amended agreement is subject to detailed terms being agreed and will only proceed if it enables the retailer to achieve profitable growth online. There can be no certainty that an agreement will be concluded, the supermarket added.

Phil Dorrell, partner at retail consultants, Retail Remedy, said the Amazon tie up was a shrewd move by Morrisons.

“You’ve got to admire Morrisons for it’s initiative and discretion, and being able to land the deal with Amazon which couldn’t have been straightforward,” he said.

“This is a low cost but strategically advantageous move by Morrisons giving the grocer a lead on its competition which few will have been expecting.

“Morrisons is leveraging its strength in its upstream supply chain with the Amazon tie-up. Volume equals cost leverage equals price advantage in its own stores.

“Price advantage is a hard battle to win, sapping time and resource. Morrisons has found a way to fight on price without it being all consuming, leaving resource available to find the next way to surprise the competition and win back customers.”