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M&S and Ocado have signed a £750 million deal to take M&S groceries into the home delivery market

27-Feb-2019
M&S and Ocado have signed a £750 million deal to take M&S groceries into the home delivery market
“M&S’ deal with Ocado marks the high street retailer’s continued fight for survival, as it enters into the home delivery game. While shareholders are sceptical given the £750 million price tag, M&S is clearly taking steps to respond to growing customer demand for home delivery of groceries – and signing a deal with Ocado is one way to make this happen fast.

“With over 30 store closures in the last few months, and a slowdown in openings of its Simply Food stores across the UK, M&S’ drive towards digital innovation has moved to the top of the agenda. As M&S’ food business makes up 61% of its revenue, and its online sales grew by 5.2% in 2018, the retailer is clearly hoping to blend their most successful revenue stream with the growth of online shopping, and drive its revenues up further.

“This move is pre-empting a growth in customer demand for online grocery shopping, in response to clearly changing customer habits in its clothing and home business. But while expanding its online offering into grocery seems like a good move on paper, the question will be whether the new M&S-Ocado partnership can hold onto current Ocado customers, who may be more loyal to the Waitrose brand than to Ocado itself. With Waitrose on the way to creating its own delivery service once the Ocado deal runs out, M&S will be facing serious competition.

“What’s more, with M&S currently seen as a “small basket” retailer, another question will be whether this investment in online grocery can encourage M&S customers to spend more on groceries with the retailer. Having a customer-centric strategy, with continued investment in loyalty management and consumer personalisation, of which M&S’ Sparks scheme is a strong example, will be crucial if M&S wants to grow its customer base with the introduction of home delivery. It’s also vital that M&S doesn’t completely disregard its stores as it looks to grow online – continuing to offer the best in-store experience will be key to driving online grocery sales and overall revenues.”

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