Yahoo Finance M&S and Ocado plot food delivery shake-up
Marks & Spencer and Ocado are eyeing a surprise tie-up that could result in the high street stalwart finally launching an online grocery delivery service after years of resistance to the industry-wide trend.
The online grocer and M&S plan to start talks in the coming weeks. Any agreement would be a coup for Ocado after it failed to seal a licensing deal with an overseas player.
Steve Rowe, M&S chief executive, told company managers last week that the retailer planned to launch a soft trial for how it might provide such a service in the autumn.
M&S has long held back from launching an online food delivery service. Its shoppers tend to buy fewer items than customers of larger rivals. Because of this, M&S has previously argued that it would be uneconomical to offer food deliveries, which on average are thought to cost retailers £12 per customer.
Even the “big four” supermarkets have struggled to make money from online deliveries.
However, the pace of online growth and the popularity of M&S’s food ranges have prompted a rethink from the new chief executive. M&S currently offers a limited range of party food that can be ordered online and collected from shops.
Sources said the review was at a very early stage and M&S was still weighing up a number of options. These include the possibility of partnering with another operator or scrapping the idea altogether.
They added that the retailer had been watching Morrisons’ recent online overhaul. This has included striking a wholesale offer with Amazon Fresh and renegotiating its agreement with Ocado.
Sources said it was unlikely that M&S would sign a deal with Amazon as there was little evidence that the online giant had cracked the grocery market in the US or the UK. In addition, M&S spent millions of pounds under former boss Marc Bolland rebuilding its own website in order to sever its ties with Amazon.
Insiders highlighted that when Ocado renegotiated its contract with Morrisons, it inserted a clause that would only prevent it from working with the other major supermarkets – Tesco, Sainsbury’s, Asda and the discounters Aldi and Lidl. As a result, Ocado would be free to strike a deal with M&S.
Ocado is also working on technology that will mean M&S could pick local orders from its existing 615 food stores rather than rely on a distribution centre.
Analysts have raised doubts that M&S would spend millions of pounds building a grocery distribution centre as the focus is on making its online service as economical as possible.
