M&S have announced the purchase of 50% Of Ocado’s retail operations.
What does the M&S/Ocado deal say about grocery e-commerce?
1) That M&S are serious about online grocery, as they have bought Ocado’s retail operations rather than seeking to simply be a retail partner. M&S is seeking to diversify its revenue sources with an eye on the future.
2) Grocery e-commerce still has challenges around delivery costs, even with Ocado’s logistics. This is a problem when you think that grocery e-commerce is for everyone. But the commercials of grocery e-commerce work best as a service pitched to above average income families and those who are happy to pay for convenience. Through this lens – e-commerce as a premium service – grocery e-commerce makes a lot of sense. The M&S/Ocado tie-up now makes even more sense. Ocado was never meant to be for *everyone*. It was always the online version of M&S Food.
What Should Waitrose Do Now?
From Waitrose’s point of view… first off, there’s no need to panic. They have until Sept 2020 to review their e-commerce strategy and find another warehouse and logistics solution.
I would expect it to be business as usual until then, with the vast majority of Waitrose.comshoppers being oblivious to the news. In the 2018 John Lewis Partnership annual report, Waitrose.com revenue was up 10.9%,
Waitrose now needs an e-commerce strategy and a new delivery and logistics partner.
What strategy should Waitrose go for?
With a Net Promoter Score of 29 (John Lewis is 64), Waitrose is not for everyone.
I would look to focus on quality, convenience and services.
Find a partner that can give same-day or next-day delivery (and one-hour delivery in cities), and offer premium products with premium delivery pricing. With the cost of dark store warehouses and logistics, the options might be:
1. Partner with Amazon (as Morrison’s has done)
2. Sell the business to Amazon (who is always reviewing its physical retail strategy in the UK)
3. Partner with Starship Technologies
4. Partner with Instacart-type delivery services (where gig workers do your shopping for you in store and delivery to your home), such as HomeRun and BuyMie
I would also expect Waitrose to look at partnering with online home entertaining and in-home chef delivery services too.
What shouldn’t Waitrose do?
I would not expect Click & Collect to be a key model to use as Waitrose has just approx 350 stores and John Lewis approx 50.
The opportunity for Waitrose
I see the end of the Ocado/Waitrose contract in 2020 as an opportunity to redefine a clear Waitrose e-commerce strategy that futureproofs sales. If Waitrose instead decided to not continue with e-commerce it would run the risk of becoming increasingly irrelevant as grocery e-commerce comes of age.
