Morrisons has confirmed its entry into online grocery after striking a 25-year deal with Internet grocer Ocado, a Profitero customer. Morrisons, the last of the big five supermarkets not to offer online shopping, has said that its online grocery service will launch by January 2014 and will be Morrisons branded.
The 25-year deal announced today is a technology and service agreement, with Morrisons initially paying out £170m to acquire Ocado’s Dordon Customer Fulfilment Centre, investing a further £46m to expand it.
The two grocers initially held talks on a possible agreement in March after Morrisons came under increasing pressure to build an online presence to compete in the fast-growing online grocery market. Retail analyst IGD predicts phenomenal growth for the UK online grocery sector, and forecasts that it will double in value to £11.1 billion by 2017.
Dalton Philips, Chief Executive of Morrisons, 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.”
Commenting on the agreement, Tim Steiner, Chief Executive of Ocado, said: “Morrisons’ desire to offer its customers the choice of online shopping illustrates the cultural 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.”
Today’s announcement follows news from Iceland that it has begun trials of a new online grocery service. The frozen food specialist is currently trialling the online delivery service at a small number of stores in the North West, North East, London and the South West. So far, Iceland says the results have been encouraging and it plans to extend the trial further in the coming months. The online service is built on Iceland’s existing free home delivery service for in-store customer purchases worth £25 or more, which currently makes more than 180,000 deliveries a week.
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