Under the terms of the new deal, Morrisons has renegotiated some components of the original contract with Ocado, including lifting the restriction on store pick, cancelling the profit share agreement and reducing the research and development fee.
Morrisons has already agreed to take capacity in Ocado’s new customer fulfilment centre in Erith, which it says will allow millions more customers to shop with Morrisons.com. The agreement has significantly lower upfront capital costs than the original operating agreement and includes an option to break after five years.
In turn, Ocado will develop a store pick solution for Morrisons.com, with Morrisons now able to fulfil online orders via a store pick anywhere in Britain, including all areas not currently covered by the supermarket. Once the store pick model goes into operation, Morrisons’ contractual obligation to share a proportion of its future online profits with Ocado will end. Also at this point, exclusivity restrictions on Ocado will be reduced, although it will be restricted from serving certain grocery retailers, including Tesco, Asda, Sainsbury’s Aldi and Lidl.
David Potts, chief executive of Morrisons, said: “The new investments in online growth are further examples of Morrisons building a broader business and will allow millions more customers all over Britain to enjoy Morrisons’ good-quality fresh food and great value for money. As food maker and shopkeeper we continue to ‘follow the customer’ and move towards achieving capital light, profitable growth online.”
At the beginning of the month, Morrisons announced an 18% average price crunch on bakery goods as part of a wider price reduction initiative.