It feels odd to say it in 2017, but one of the UK’s most well-known food retailers are only now announcing a move into online grocery delivery.
M&S have announced their intention to trial online grocery deliveries within certain postcodes. Although the mechanics are still being decided, Ocado have been named as a possible partner for the trial.
Morrisons already partner with Ocado for online grocery and with the expertise of Ocado and the strategic turnaround of Morrisons, the relationship appears to be flourishing. The model operates out of Dordon customer fulfilment centre but is expanding into store picking using technology developed with Ocado.
Different customer, different model
The M&S model will probably look a little different, primarily because the range is much narrower than that of Morrisons, and the basket size smaller. Nor is the customer shopping mission comparable, with M&S catering more to the convenience, meal for tonight, market compared to Morrisons family shop mission.
If the Ocado deal goes ahead there will be a couple of options: will M&S list its range on the Ocado website, like Waitrose, or will Ocado assist M&S in fulfilling its own orders? The later seems more likely but with smaller orders the economics would be challenging. Scale is imperative: more orders, more picks, more journeys, equals higher costs.
Ocado launched Smart Pass, like Amazon Prime, where customers pay a subscription rather than for each delivery. This has resulted in more transactions but smaller basket sizes for Ocado, shopping more often and completely aligned with the convenience supermarket shopping mission. M&S would fit that model very well, loyal customers shopping frequently but with smaller basket sizes.
Playing catch up has its advantages
Amazon reportedly took a punt on Prime, more on gut feel than substantiating data. Ocado may have made a similar decision. But by the time M&S launch, Ocado will have data to support a decision and this knowledge will be attractive to M&S. Sometimes playing catch has its advantages.
The timing of M&S online grocery shopping while late, has the advantage of learning from other grocer’s business models and Ocado’s now profitable operation. M&S will understand the pitfalls to avoid and the points of advantage to seek out. Expect small incremental steps rather than giant leaps.