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Morrisons’ – Retail Strategy

What they did this Christmas: Morrisons and Topps Tiles

What they did this Christmas: Morrisons and Topps Tiles


After years of will-they-won’t-they speculation and city commitments, Morrisons has launched an online grocery offer, covering 1/5 of UK households or 40% of its 2014 target. The grocer aims to be able to offer online ordering for home delivery to half of the UK’s households by the end of the year, accelerated in the summer by opening up the proposition to London.

Critical to this is the £216m strategic partnership between Morrisons and Ocado, allowing Morrisons to accelerate its route to market by operating off the back of Ocado’s already established technical and operational infrastructure. At the heart of Ocado’s appeal is the impressive and heavily automated distribution centre in Warwick which makes short work of complex order picking, moving orders out of the D.C. and into local hubs efficiently, saving Morrisons a lot of capital investment in the process. Until the service is running at pace and Morrisons start to see cash in the virtual till, it’s premature to comment on the commercial value of the partnership, and who has benefitted the most. However, the deal critically gave Morrisons pace, and the ability to get to market way ahead of the self-build strategy they were previously following.

The industry reception to the move has been mixed, with many commenting that Morrisons is too late to the party, whilst others believe second mover advantage means that Morrisons can learn from the mistakes of the past and develop a proposition that stands out from the competitive set.

Looking first at its late arrival; it’s an expensive party to join and from a cost-benefit-analysis perspective, Morrisons was one of the few grocers to front up the commercial inequity in delivering groceries to home. As Dalton Phillips himself put it – the grocery market spent a lot of time in the 90s starting the price wars which reduced margin and challenged the service proposition – all against a model where the customer met the full cost of “pick, pack and despatch” by doing it all themselves. Picking up that cost in the form of store staff hours, delivery and logistics is expensive – with the latest estimate being that every grocery order to home costs the retailer between £12-15. It should not be overlooked that Ocado has been in this game for 14 years with the weight of the Waitrose range behind it, and has yet to make an annual profit.

However, from the broader commercial perspective, there is a long game being played here which is more about customer loyalty and life time value, and less about single transaction value. Morrisons estimates that the lack of an online offering has cost £500m/year, with over 30% of its customer base – 3m customers per week – shopping online with a competitor. As Internet Retailing’s very own Ian Jindal has commented, by being last to market the challenge is not about acquiring shoppers for the service, but winning them back from established competitors. Given a lot of the convenience of online shopping for the consumer is about history and repetition, the switch will not be easy to execute, even with a “favourites” import from rival websites.

Second mover advantage has enabled Morrisons to learn from the mistakes of others, although this remains a challenge in a commoditised market where much of the product is branded and the service proposition is muscle memory. Morrisons has made a positive start in translating some of the brand’s core propositional messages to online, including bringing Market Street to life with butchers’ cuts, allowing customers to choose the size of their steaks – although it does rely heavily on being an existing Morrisons customer and therefore understanding what Market Street and Food Cupboard mean in a navigational context. It has also introduced a “door stop check” for their customers, who are able to check their delivery and return any unwanted/sub standard items to the driver instantly – playing to both the service promise and the importance of quality fresh produce to the Morrisons proposition.

However, beyond these touches, if Morrisons does indeed have second mover advantage it is difficult to see where they are exploiting it. At the centre of any online delivery service is the web experience, and the current iteration is letting Morrisons down. There are some significant UX niggles which I’m sure will be picked up elsewhere in this review, but perhaps more significantly it is nothing special. Morrisons has been working on moving online for years, and really needed to knock the competition out of the water with its multi-channel offering – by launching with a web only standard interface it has missed this opportunity and failed to take whatever advantage was available.

The challenge for Morrisons on many fronts is occupying that middle ground, or the famously “squeezed middle”, and with its online delivery proposition it is in danger of occupying the same space virtually – having to face the challenge of winning back online customers from the other big players, whilst defending the threat of whatever Aldi, Lidl and Amazon have to offer in the coming years.


The simple scoring from Transform is based on whether or not five services are offered by the retailer in the UK with a score of 0 for no and 5 for yes. On this basis, Morrisons scores 5/25.

Collection in-store: No

Mobile app: No

Mobile web: Yes

iPad app: No

In-store tech: No

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