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Morrisons sets date for online grocery service, while Ocado reveals that it may play a role

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This was the week that Morrisons set the date for the launch of its online grocery service. The long-awaited launch is now due in 2014. The supermarket has for some time been the only major UK supermarket without an online food delivery service – and its full-year results, published yesterday, suggest that it is suffering for the lack of one.

In the year to February 3, turnover rose by 3% to £18.1bn, but like-for-like sales, excluding fuel and VAT, fell by 2.1%. Profits were also down, with pre-tax profits coming in at £879m, down by 7% from £947m last time.

The company said it had seen a change in the way that customers shop over the year. In his review of the business, chief executive Dalton Philips said: “In this environment customers inevitably changed their shopping habits. They shopped around in different formats, using convenience stores for top-up shopping, increasing their use of the online channel, putting fewer items into their baskets and managing their spend carefully.

“Average basket size, despite inflation, was in line with the prior year. However, although we welcomed an average of 11.4m customers each week into our stores, this was 0.4m fewer than in the prior year on a like-for-like basis.”

This was a year in which Morrisons started on the multichannel path, with the launch of its wine sales service, Morrisons Cellar, and the opening of stores for its online nursery retailer Kiddicare. It has also earmarked £150m for multichannel development in 2013/14.

Morrisons chairman Sir Ian Gibson put the emphasis on investing for the future. “It has also been a period of significant strategic progress as we continue to lay the foundations for future growth,” he said. As well as moving into the multichannel arena, the company has also focused on store performance and on expanding its convenience store format.

Chief executive Dalton Philips continued on the same theme. “We continue to invest for the long-term success of our business,” he said, adding that the news that an online food service was to launch in 2014 would be “another important step in Morrisons’ strategy of being ‘Different and Better than Ever’.”

“We may be a late entrant to the online food market,” he added, “but we have learnt from our investment with Kiddicare and Fresh Direct. We have long been a leader in fresh food and our craft skills and vertical integration really set us apart from the competition. Ensuring that these points of difference translate into our online food offer will be a priority.”

Those plans may well involve tapping into the knowhow of online grocer Ocado , which this week put out both its interim management statement for the 12 weeks to February 24, and a confirmation that it is talking to Morrisons about its online grocery business.

Ongoing negotiations, said Ocado, “may lead to an agreement to license certain of Ocado’s existing and future intellectual property and operating knowledge for the purposes of Morrison commencing an online grocery business in the UK.” But it was keen to say that there was no proposal for Morrison to buy any part of Ocado, and that its partnership with Waitrose would be unaffected.

In its own figures, Ocado reported 14.4% growth in sales to £185.5m in the 12 weeks to February 24. Average weekly orders were up by 12% to 130,995 while average order size grew by 2.2% to £117.99.

The company said its second customer fulfillment centre was now fully operational, as was its first dedicated non-food distribution centre.

Tim Steiner, Ocado chief executive, said: “We maintained the momentum in sales growth and new customer acquisition with which we entered the year. Further improvements to the proposition to customers that we are making this year should enhance our appeal to shoppers and enable us to continue this momentum.

“We successfully opened CFC2 last month on time and on budget, and this substantially increases our capacity to serve the growing demand from many more customers who like shopping online for their groceries.”

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