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How Morrisons is expanding through multichannel and wholesale – and how Co-op is developing its food delivery

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Morrisons today set out how it would expand the multichannel services on offer to its direct customers, while growing wholesale partnerships with retailers including Amazon to £1bn a year as it reported a sharp rise in pre-tax profits. 

Morrisons, a Top50 retailer in IRUK Top500 research, reported revenues of £8.8bn in the half-year to August 4. That’s up by 0.4% on the same time last year. Like-for-like sales excluding fuel and VAT were up by 0.2%. Pre-tax profits were 48.5% ahead at £202m. 

Morrisons chief executive David Potts said: “We stayed focused on our Fix, Rebuild and Grow strategy and were pleased to maintain the momentum of the turnaround against strong comparatives last year. Sales and profit progress was robust and we again invested in improving our competitiveness for customers.

“News today of new wholesale initiatives, including a further extension of our partnership with Amazon and of another special dividend again shows how new Morrisons continues to become broader and stronger for all stakeholders and how progress can be meaningful and sustainable even in more testing trading conditions. Such progress is only made possible by Morrisons’ exceptional team of food makers and shopkeepers.”

Online and multichannel services

Morrisons runs its online grocery service in partnership with Ocado, but following the fire at Ocado’s Andover customer fulfilment centre (CFC) it has given up its space in Ocado’s Erith CFC until January 2021 and is instead delivering from more of its stores as it expands its online deliveries to new areas including parts of Scotland, the South West and the North West. In a new looser relationship Ocado is no longer Morrisons’ exclusive digital partners and Morrisons says that will give it “other significant opportunities and partnerships” and “ more strategic flexibility to improve the digital offer for customers in this important growth area for us.”

Morrisons now offers returns and collection for third-party retailers via operator Doddle in more than 375 stores. 

Across its business the retailer is now working to make its prices more competitive and it is refitting stores while introducing its Nutmeg clothing range to more of them.

Wholesale partnerships

Morrisons said it was on track to meet its target of turning over £1bn a year through wholesale as it expands its relationship with Amazon. The supermarket said it was currently making more than £700m a year through selling to other retailers – in addition to its own direct sales to shoppers – and that it expects that to hit £1bn “in due course”.

Morrisons has agreed a new multi-year agreement to find new ways to improve the shopping experience for both Morrisons and Amazon customers. The partnership is in in addition to its existing supply of the Morrisons at Amazon online grocery home delivery service, which continues to expand. Shoppers using the service can order a Morrisons shop online that is picked at a local store and delivered by Amazon, with one-hour delivery an option for many, although not all, customers. The service is currently available in Leeds, Manchester, Birmingham, and parts of London and the Home Counties. In 2019 it will start to become available in Glasgow, Newcastle, Liverpool, Sheffield and Portsmouth and will expand further in coming years. 

Morrisons is also selling via wholesale partnerships with petrol station operators Harvest Energy and Rontec and is opening Morrisons Daily convenience stores on their sites. Some McColls convenience stores are also coverting to Morrisons Daily stores, while the supermarket is expecting to new wholesale customer Y-International, part of the Middle East grocery chain Lulu. 

The Co-op expands food delivery innovation

The Co-op pointed to digital innovations in its food business including extended online food delivery trials in London using zero emission cargo bikes, and in partnership with Deliveroo, as it reported revenue of £5.4bn in the six months to July 6, up by 12% from £4.8bn at the same time last year. Pre-tax profits of £25m were down from £44m last time. The retailer has also started to trial click and collect, using lockers within Co-op food stores. 

Co-op chief executive Steve Murrells said: “Our food business continues to perform strongly in a highly competitive market and has now recorded 22 consecutive quarters of like-for-like sales growth. As our largest business it is providing the fuel for our growth in terms of member value and community impact.”

Total food sales were up by 3% in its latest half-year, and like-for-like sales by 1.7%.

Looking ahead, the Co-op said it was planning and preparing for Brexit despite ongoing uncertainty. “In the event of a no deal Brexit there is an increased risk of some disruption to our supply chain,” it said, “however we will do all we can to protect our customers and members from this impact.”

Image: InternetRetailing Media/Paul Skeldon

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