Morrisons makes online move

Morrisons has made a firm step into the online grocery market and struck a long-term agreement with Ocado.

Despite Waitrose venting issues earlier in the month, after Morrisons announced talks with Ocado in a financial statement, a deal has been announced that will enable Morrisons to enter the market “quickly”.

The agreement consists of technology and services from Ocado, as well as the sale and leaseback of property and equipment at Ocado’s Dordon site. Morrisons is to make a payment of around £170m to Ocado in order to acquire the Dordon Customer Fulfilment Centre (CFC) and facilities. Another £46m will be pumped into the Dordon site in order to expand it and accommodate Morrisons’ range.

An online grocery platform will go live under the address Morrisons.com and will have a “clear Morrisons look and feel”, Morrisons said. The supermarket chain added: “Fulfilment will be from Ocado’s recently opened Dordon CFC in the Midlands, with customer deliveries through a Morrisons liveried fleet.”

It is expected the new business will further incur £25m of development costs over the next 12 months, bringing the company’s total full-year new business development spend to £65m. However, Morrisons expects positive results from its investment.

Morrisons’ chief executive Dalton Philips said: “This agreement is a significant strategic step for Morrisons. From a standing start, Morrisons will be competing in the fast growing online channel by the end of this year with a really compelling proposition.”

Meanwhile Ocado chief executive Tim Steiner said: “Morrisons’ desire to offer its customers the choice of online shopping illustrates the structural shift we are seeing in favour of the channel. We see Morrisons’ decision to adopt our model to drive its online launch as a further endorsement of our technological and logistical excellence.”