Morrisons banks on Ocado tie-up to click with shoppers
A Morrisons branch.
The supermarket is playing catch-up with Tesco, Asda and Sainsbury's,
who have been expanding their internet presence since the late 1990s.
Photograph: Reuters Photographer/Reuters
There's uproar in Morrisons
HQ. Under the bright light of a towering windowed atrium in the centre
of the building, the grocer's in-house fishmongers, florists, butchers
and bakers are battling it out in an X Factor-style competition to
become the Bradford-based supermarket's top fresh food experts.
Dalton Philips, the company's chief executive, is enthusiastically shaking fishy hands and posing for photographs beside flower displays as he waxes lyrical about the skills of his team and the freshness of the produce.
It's a scene that Sir Ken Morrison, the man who built his father's grocery store into a nationwide chain, would enjoy. It was his idea to bring the colour, life and expertise of food specialists into the supermarket with the "Market Street" displays that are a feature of every Morrison store.
But Philips has a different vision. He wants to put Market Street on the virtual high street, as part of the supermarket's multimillion pound deal with Ocado, the online business which currently delivers groceries from Waitrose.
Sir Ken, who stepped down in 2008 when Tesco was already established online, avoided such newfangled fancies. As a young man he delivered groceries, on his bike, he used to say, and he didn't intend to offer such a service ever again. He focused on keeping it simple: shops the same size selling the same stuff so that costs were low and profit margins high.
Sir Ken's successor, Marc Bolland – now boss at Marks & Spencer – also failed to move Morrisons online. But Philips, who arrived in Bradford in 2010 from upmarket Canadian grocer Loblaw and, before that, Walmart's now defunct German chain, realised Morrisons was suffering because it was behind the times.
"This is a growing market and our customers expect us to be online," says Philips in his distinctive accent, originally Irish but mangled by hundreds of trips over the Atlantic. "There has been a significant shift in the food market."
Shoppers, he says, want to order their groceries over the internet because they are short on time, or want to save money by keeping a tight rein on their shopping list and avoiding paying for transport to a store.
So in January, Morrisons will deliver its first online orders in the Midlands, close to the Warwickshire distribution warehouse Ocado will operate for the supermarket. Before the end of next year, the aim is to use "spoke" depots already owned by Ocado, or new ones set up by Morrisons, to venture further afield. London will be an early target.
"We are very ambitious. We want to go national. It will take a couple of years, but 70% of the population will have access quite quickly," says Philips.
Still, Morrisons is playing catch-up with Tesco, Asda and Sainsbury's who have been expanding their internet presence since the late 1990s. Both Tesco and Sainsbury's have recently revealed strong online growth. How can Morrisons stand out from the crowd and win over shoppers?
"We will have the freshest proposition of anybody out there," says Philips. "I think we are really going to surprise people."
His idea is to combine the "craft skills" of Morrisons' butchers, bakers and fishmongers with the food production facilities it already owns to deliver food that will encourage people to buy more fresh items online.
At present, most shoppers buy less fruit and vegetables, fresh meat and bread, for example, via the internet than they do in stores.
Morrisons wants to change that by offering shoppers more guarantees of freshness with, for example, steak cut to a specific thickness and freshly baked bread. To achieve that, it is looking at delivering some breads from local stores, putting special butchery teams into its existing meat processing plants or, perhaps, setting up kitchens within Ocado's distribution warehouse.
Doing that profitably will be tricky, but Philips is confident Morrisons can deliver. "The maths add up," he says. "People think that if you are going to do fresh food well it will cost you money, but it doesn't have to."
Still, the idea will add fuel to concerns about rising costs and falling profits.
Some City analysts questioned the £216m cost of Morrisons' tie-up with Ocado which came after earlier investments – in the toy and clothing business Kiddicare and a 10% stake in the New York online grocer Fresh Direct – which were intended to teach Morrisons how to set up its own online grocery service. Instead it has written off the £27m cost of its attempts to build a service in-house, including IT costs and putting fact-finding teams into the US and Kiddicare.
Philips says Morrisons still has "one of the best profit margins in Europe", but the retailer has also been forced to spend £300m on new IT systems after Sir Ken's penny-pinching ways left stores without time-saving technology. More cash is being poured into the new M Local convenience store chain – another growth business which previous management had rejected. So far there are 50 of the small local shops, there should be 100 by the end of the year, and 100 more in 2014.
But there's also a fear that management are so distracted by online and M Local, that they have lost focus on the basics. With its low prices and emphasis on British produce, Morrisons should be cleaning up as shoppers tighten their belts during the economic downturn and look for reassurance on food's provenance after the horsemeat scandal. But instead it is losing market share and underlying sales are down. Morrisons, however, insists it is only held back by its lack of online and convenience stores.
"There are always things we could improve, but you have to look at sales in the context of the market. We know competitors are talking about [declining] like-for-like sales in bricks and mortar stores. We are no different," says Philips.
But other retailers, from Primark to Aldi, have continued to grow strongly without any online presence by offering shoppers something really compelling. Being able to order individually cut fillet steak online may be tempting, but will it deliver more for Morrisons than its old-fashioned Yorkshire bargains once did?
source: http://www.theguardian.com/business/2013/oct/11/morrisons-ocado-home-delivery-service
Dalton Philips, the company's chief executive, is enthusiastically shaking fishy hands and posing for photographs beside flower displays as he waxes lyrical about the skills of his team and the freshness of the produce.
It's a scene that Sir Ken Morrison, the man who built his father's grocery store into a nationwide chain, would enjoy. It was his idea to bring the colour, life and expertise of food specialists into the supermarket with the "Market Street" displays that are a feature of every Morrison store.
But Philips has a different vision. He wants to put Market Street on the virtual high street, as part of the supermarket's multimillion pound deal with Ocado, the online business which currently delivers groceries from Waitrose.
Sir Ken, who stepped down in 2008 when Tesco was already established online, avoided such newfangled fancies. As a young man he delivered groceries, on his bike, he used to say, and he didn't intend to offer such a service ever again. He focused on keeping it simple: shops the same size selling the same stuff so that costs were low and profit margins high.
Sir Ken's successor, Marc Bolland – now boss at Marks & Spencer – also failed to move Morrisons online. But Philips, who arrived in Bradford in 2010 from upmarket Canadian grocer Loblaw and, before that, Walmart's now defunct German chain, realised Morrisons was suffering because it was behind the times.
"This is a growing market and our customers expect us to be online," says Philips in his distinctive accent, originally Irish but mangled by hundreds of trips over the Atlantic. "There has been a significant shift in the food market."
Shoppers, he says, want to order their groceries over the internet because they are short on time, or want to save money by keeping a tight rein on their shopping list and avoiding paying for transport to a store.
So in January, Morrisons will deliver its first online orders in the Midlands, close to the Warwickshire distribution warehouse Ocado will operate for the supermarket. Before the end of next year, the aim is to use "spoke" depots already owned by Ocado, or new ones set up by Morrisons, to venture further afield. London will be an early target.
"We are very ambitious. We want to go national. It will take a couple of years, but 70% of the population will have access quite quickly," says Philips.
Still, Morrisons is playing catch-up with Tesco, Asda and Sainsbury's who have been expanding their internet presence since the late 1990s. Both Tesco and Sainsbury's have recently revealed strong online growth. How can Morrisons stand out from the crowd and win over shoppers?
"We will have the freshest proposition of anybody out there," says Philips. "I think we are really going to surprise people."
His idea is to combine the "craft skills" of Morrisons' butchers, bakers and fishmongers with the food production facilities it already owns to deliver food that will encourage people to buy more fresh items online.
At present, most shoppers buy less fruit and vegetables, fresh meat and bread, for example, via the internet than they do in stores.
Morrisons wants to change that by offering shoppers more guarantees of freshness with, for example, steak cut to a specific thickness and freshly baked bread. To achieve that, it is looking at delivering some breads from local stores, putting special butchery teams into its existing meat processing plants or, perhaps, setting up kitchens within Ocado's distribution warehouse.
Doing that profitably will be tricky, but Philips is confident Morrisons can deliver. "The maths add up," he says. "People think that if you are going to do fresh food well it will cost you money, but it doesn't have to."
Still, the idea will add fuel to concerns about rising costs and falling profits.
Some City analysts questioned the £216m cost of Morrisons' tie-up with Ocado which came after earlier investments – in the toy and clothing business Kiddicare and a 10% stake in the New York online grocer Fresh Direct – which were intended to teach Morrisons how to set up its own online grocery service. Instead it has written off the £27m cost of its attempts to build a service in-house, including IT costs and putting fact-finding teams into the US and Kiddicare.
Philips says Morrisons still has "one of the best profit margins in Europe", but the retailer has also been forced to spend £300m on new IT systems after Sir Ken's penny-pinching ways left stores without time-saving technology. More cash is being poured into the new M Local convenience store chain – another growth business which previous management had rejected. So far there are 50 of the small local shops, there should be 100 by the end of the year, and 100 more in 2014.
But there's also a fear that management are so distracted by online and M Local, that they have lost focus on the basics. With its low prices and emphasis on British produce, Morrisons should be cleaning up as shoppers tighten their belts during the economic downturn and look for reassurance on food's provenance after the horsemeat scandal. But instead it is losing market share and underlying sales are down. Morrisons, however, insists it is only held back by its lack of online and convenience stores.
"There are always things we could improve, but you have to look at sales in the context of the market. We know competitors are talking about [declining] like-for-like sales in bricks and mortar stores. We are no different," says Philips.
But other retailers, from Primark to Aldi, have continued to grow strongly without any online presence by offering shoppers something really compelling. Being able to order individually cut fillet steak online may be tempting, but will it deliver more for Morrisons than its old-fashioned Yorkshire bargains once did?
source: http://www.theguardian.com/business/2013/oct/11/morrisons-ocado-home-delivery-service
Categories:
0 comments:
Post a Comment