Morrisons has announced its plans to launch an online grocery service after acquiring an approximately 10 percent stake in US online grocer FreshDirect for £32 million.
Through this acquisition, Morrisons will set up a London-based online grocery business, in which FreshDirect will have a minority economic interest. FreshDirect is currently available to more than 600,000 customers in New York, New Jersey and Connecticut.
The 10 percent stake also allows Morrisons to have a seat on board at FreshDirect, and the opportunity to embed a team of Morrisons employees in the US business to learn how it operates.
“What we learn from FreshDirect will be invaluable as we plan our own profitable e-commerce business for the UK,” said Dalton Philips, chief executive of Morrisons.
The acquisition follows Morrisons’ purchase of UK-based baby goods retailer kiddicare.com last month, the supermarket’s first step into online sales – a decade after Tesco, Asda and Sainsbury’s.
Morrisons has also bought the rights to the kiddicare.com operating and technology platform, which it plans to expand for general merchandise categories, to be launched “gradually” from Spring 2012.
“Convenience stores and online shopping are the two fastest growing sectors of the market and developing our offer in these channels will be another focus of our future strategy,” the company said today in its preliminary results for the year ended 30 January 2011.
“We believe we can build a profitable business online, and we are therefore now committing to launch Morrisons.com, for both grocery and non-food products, in the coming two years.”
Morrisons recorded pre-tax profits of £874 million in the period, up from £858 million the previous year.
The company said that it is increasing efficiency in the business through measures such as replacing its “ageing systems” through its Evolve programme and by enhancing its distribution network.
It said that it accelerated the deployment of its new IT systems across all areas of the business during the 12 months to the end of January, and will invest £310 million this year to replace all of the company’s core systems and technology infrastructure. The IT systems programme is scheduled to run through 2013.
So far, Oracle-based Morrisons has replaced the majority of its payroll, HR and financial systems, installed a new wide-area network and upgraded most of its store hardware and voice-picking technology in its distribution centres.
It has also rolled out a new electronic point of sale system to more than 200 stores, and successfully piloted a new ERP system in one of its produce factories. This system will now be rolled out to its other factories.
The company is currently running a pilot of new software for running its distribution centres at one depot.
Morrisons is also following in the footsteps of Tesco and Sainsbury’s with regards to the convenience store model. Morrisons will start a trial of three ‘M local’ stores from July, though it did not disclose where these would be located.
When Morrisons acquired the Safeway chain in 2004, it had a tradition of developing its core systems in-house and was sometimes seen as reluctant to take up new technology – in contrast with Safeway, which until the acquisition, was known for adopting cutting-edge systems as the first supermarket to implement Chip and PIN and have early trials of RFID technology.
Three years later, Marc Bolland, then-chief executive at Morrison, said the company would still “not be seeking to implement any ‘leading edge’ technology, as we believe our competitive advantages come in other areas, such as in-store service”.
Nevertheless, Morrisons did later begin a major IT overhaul that involved the implementation of a complete Oracle retail suite of merchandising, planning and stores applications, plus the Oracle E-Business Suite for financials, HR/payroll and manufacturing.
It also rolled out Oracle’s Siebel platform for CRM and Oracle Fusion middleware, including Oracle SOA Suite and Oracle Identity Management – all underpinned by Oracle databases on HP servers.