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Morrisons expands home delivery service with new Ocado deal

Published 09/08/2016

Morrisons chief executive David Potts said the changes will see it reach millions more customers
Morrisons chief executive David Potts said the changes will see it reach millions more customers

Supermarket Morrisons is expanding its home delivery service nationwide and offering non-food products to online customers for the first time under a new deal with partner Ocado.

The UK's fourth biggest grocery chain has renegotiated its agreement with online supermarket Ocado to allow it to store-pick orders, doubling the reach of its delivery. serves around half of UK households, largely across central England, but currently does not deliver to areas such as the South West or Scotland.

Chief executive David Potts said the changes will see it reach millions more customers.

He added: "The new investments in online growth are further examples of Morrisons building a broader business and will allow millions more customers all over Britain to enjoy Morrisons' good-quality fresh food and great value for money."

Morrisons said it was adding thousands of non-food items currently sold on Ocado to its delivery service, including well-known kitchen equipment brands.

As well as launching a store-pick service for home delivery orders, Bradford-based Morrisons has also previously announced it would take up space at Ocado's new customer fulfilment centre in Erith, south-east London, which will boost its reach.

But the extra investments will see remain loss-making for slightly longer, the supermarket confirmed, although it is expected to be a key part of Mr Potts' plans to boost group profits by up to £100 million in future years.

The re-negotiated terms of its deal with Ocado will also see Morrisons end its profit- sharing agreement once the store-picking service is up and running.

Ocado will likewise see fewer restrictions which currently prevent it from working with other retailers, although it has still agreed not to partner with major players Tesco, Asda , Sainsbury's and discounters Aldi and Lidl.

The expansion of comes as the chain stages a fightback against its rivals after being slow to join the race online.

It signed a £170 million contract with Ocado in 2013, providing the chain with its first online delivery service.

It also recently joined forces with Amazon, allowing the internet giant to deliver fresh and frozen food products for the first time.

AmazonFresh launched in June and is now available to customers in 128 postcodes across London who are members of the Prime subscription service.

Shares in Morrisons lifted 2%, while Ocado's stock surged 5%.

Retail experts said Morrisons had negotiated a much better deal financially, while Ocado will have greater freedom to work with other UK and international retailers.

Shore Capital analysts said: "We see the announcement of the agreement between Morrisons and Ocado as good news all round."

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