9 May, 2021

Will Ocado Come To Marks & Spencer’s Rescue?

M & Ss previous vision for it’s food sales division had been to expand into convenience stores providing a place for shoppers and local office and retail workers to purchase a ready to go take-away lunch or sandwich. Less rarely has it been seen as somewhere to go for one’s weekly food shop and the company’s golden touch seems to have deserted the once admired business model. For instance, M & Ss share price has dramatically declining since 2015 and now there has been a recent cancellation of dividends due to the coronavirus pandemic lockdown which has hit sales and profits.

From it’s beginning in 1884 when David Marks opened the Penny Bazaar in Leeds Market and teamed up with Thomas Spencer, M & S has been associated with food sales when it became the first self-service food retailer and then the first to sell ready-made meals. It entered the FTSE 100 in 1984 becoming the fifth largest British listed company and by 1998 was the first British retailer to publish pre-tax profits of more that one billion pounds sterling.

However, the once great British company has drifted in popularity over the last couple of decades and as food outlets now account from nearly one-third of its close on 1,000 stores in its the UK market, M & S has been hit by fierce competition from online food rivals selling direct to customers.

Even though there has been increasing demand for food deliveries direct to people’s home and M & S has been selling online for over three years, their business model has been playing online catch-up with the opposition who were first to market and quickly established their position with supermarket grocery deliveries.

Now M & Ss Chairman, Archie Norman, once of Asda’s “George” clothing range fame, has asserted his desire to get a bigger slice of the online grocery market by purchasing a hefty 50 per cent share costing £750 million in Ocado the online supermarket who describes itself as quote: “The world’s largest dedicated online grocery retailer.” Founded in 2000 and recognised by its colourful vans,  the retailer set its stall in the grocery market by deciding not to have any offline stores and instead to concentrate on home deliveries only straight from its warehouses.

The opening between the two companies joining together came about because Ocado’s 20 year association with Waitrose was coming to a conclusion. On the face of it, the partnership seems ideal, especially with the coronavirus pandemic forcing more and more people to shop online meaning home delivers have almost doubled. But the M & S model with its large retail estate and smaller food containers and Ocado facing a battle to keep Waitrose customers, may just not be the ideal marriage made in heaven.

Obviously Archie Norman has other ideas for both brands and to enlarge their online space. And he does have the track record to turn retail around. With Ocado’s warehousing experience and systems and M & Ss history and capability to launch new food product ranges, who would bet against the success of the tie-up, especially with the upswing in online shopping.

All will be revealed at the expected launch after the summer bank holiday on the 1st September.


Business Talk

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