Supermarket chain Wm Morrison is considering expanding its relationship with Amazon and striking new partnerships with groups such as Uber Eats as it looks to boost its online service after paring back an exclusive delivery deal with Ocado.
Morrisons struck a deal with Ocado in 2013 that enabled it to break into the online grocery business. It said on Thursday that it had revised the agreement so it could have “more than one digital partner”.
David Potts, chief executive, said the group’s plans “could certainly include doing more with Amazon”, which it has an existing relationship with, adding that Morrisons could now “dance at more than one wedding”.
The UK’s fourth-largest grocer on Thursday reported that sales had fallen behind expectations in its first quarter, with slower than expected growth in its stores and online.
Morrisons posted a like-for-like retail sales increase of 0.2 per cent for the 13 weeks to May 5, down from 1.8 per cent growth in same-store sales a year earlier. It missed analysts’ expectations of a 0.5 per cent rise.
Morrisons acts as a wholesaler to Amazon, meaning it sells its own products on Amazon’s website, but has not until now used the US group’s technology to deliver its goods.
Mr Potts said he also wanted to tie up with companies engaged in “the last mile of food fulfilment and ultrafast delivery”. This could potentially include groups such as Uber Eats and Just Eat, and others that could offer “very very short timescales between an order by the customer and the receipt of the goods”.
He said Morrisons was in talks with a number of companies and “would not at this stage be including companies in or out”.
The revised deal follows Ocado’s tie-up with rival grocer Marks and Spencer, which will go live in 2020 when its deal to supply Waitrose products comes to an end.
Morrisons said its decision to move to multiple online suppliers was not linked to the M&S deal with Ocado.
Morrisons has already scaled back elements of its deal with Ocado, signed by former chief executive Dalton Philips, following a backlash from executives who criticised it for being too costly and restrictive.
The chain blamed “competitive and challenging” markets for its first-quarter performance and said “political and economic uncertainty” was “continuing to impact consumer confidence”.
Group like-for-like sales, excluding fuel, also fell behind analyst consensus compiled by the company. Morrisons posted a 2.3 per cent rise in group sales, compared with an expected rate of 2.5 per cent and growth of 3.6 per cent last year.
Bruno Monteyne, analyst at Bernstein, said the company’s underwhelming retail performance and slowdown in sales growth were “early indications that Morrisons is starting to underperform its peers” including Tesco and Asda.
Morrisons revealed it would be temporarily handing back full use of Ocado’s Erith automated warehouse to the company following a fire at its Andover warehouse in February this year. A robot catching fire emerged as the cause of the blaze.
Morrisons will vacate the warehouse until 2021 in return for lower pick fees, and will use its stores to service online orders as well as its Dordon CFC. In the meantime it will stop paying the start-up and running fees associated with Erith CFC, resulting in a cost saving.
In 2016 it broke free of arrangements that prevented it from picking online orders off shelves in its own stores in areas not served by Ocado’s fleet, in return for Morrisons renting extra space in a new Ocado warehouse.
Mr Potts said at the time that the revised deal was a “move towards achieving capital light, profitable growth online”.