With a waiting list of over one million customers, Ocado starts new partnership with M&S
Ocado CEO Tim Steiner and M&S CEO Steve Rowe announcing the new joint venture between the two retailers
From 1st September, customers can have their Marks & Spencer branded groceries delivered to their homes via Ocado Retail for the first time. With thousands of Marks & Spencer products on the Ocado.com site, customers can select their favourites alongside other big brands and Ocado own label products.
This is a critical element of the ‘Never The Same Again’ turnaround plan for Marks & Spencer, as the business focuses on digital and online solutions after significant changes to its store portfolio, which has seen recent announcements about store closures and over 7,000 job cuts.
Yet it seems as if the sun may be shining on the deal for Chairman Archie Norman & CEO Steve Rowe. When plans for the joint venture were first announced on 27 February 2019, the online grocery market was in very different shape. Marks & Spencer had faced criticism for the big $2 billion price tag paid to create Ocado Retail, but the negativity seems to have subsided given the sizeable and speedy growth of the online grocery sales, encouraged by the demand from customers during lockdown.
Market share has now doubled in just a matter of months to 14% with rapid growth triggered by the impact of the pandemic and shoppers keen to receive deliveries at home.
Yet online still delivers the lowest amount of profit for the big supermarket brands like Sainsburys and Tesco, largely due to the intensity of labour required in picking and delivering orders, vs. the customer heading into store.
From 2000, it had taken two decades for the online delivery to grow from 0% - 7% of the total grocery market.
When Ocado launched it 2000, it did so with no physical stores, building an automated business from the very start. In January 2002, an official partnership with Waitrose & Partners commenced. Waitrose had already started its own delivery service but decided it needed the scale and size of Ocado to be successful. The partnership has been just that for nearly twenty years.
Today Ocado has 15% of the online grocery market with over 55,000 products for customers to browse from, and due to the huge demand created by Covid-19, a waiting list of over a million customers.
In an interview with the Financial Times, Tim Steiner, Founder and Chief Executive of Ocado explained how customers are evolving their thinking when it comes to online grocery shopping. “The whole world has also been educated in pandemics and virus transmission. Everybody is taking less risk than they did historically, and it’s about deciding where and when you want to take your risk. Do I take it to visit my family and friends, or do I take it to go grocery shopping?”
Whilst the retail world is watching on what happens next with anticipation, consumers have already shared a variety of reactions on social media. Some find the £60 minimum order too steep for their weekly shop. Other customers with a booked order have highlighted that they have already received an email to tell them that certain Marks & Spencer products are not in stock for those all-important first deliveries, and they are being pacified in advance with a voucher worth £5 off their next shop.
Marks & Spencer knows that this will be a critical launch and is offering ‘introductory pricing’ on a range of products to try and win over existing Ocado customers and encourage many more of its own brand loyalists.
Waitrose.com is ramping up its advertising to attract as many customers over to its own brand shopping site. It recently announced trials with Deliveroo to deliver groceries in 30 minutes in certain parts of the UK.
Both Ocado and Marks & Spencer will be pulling out all the stops to facilitate a smooth launch but the online grocery market will not be won in a sprint.
The channel continues to develop, and with Amazon still to fulfil its potential reach with AmazonFresh - everything is for the taking.
