M&S and Ocado announce £750m food delivery joint venture

Marks and Spencer is to work with Ocado to give M&S customers access to online grocery delivery for the first time.

The 50/50 joint venture will see M&S take a 50% share of Ocado’s UK retail business, with access to the Ocado Smart Platform.

The £750m deal will give customers access to M&S branded goods when ordering online through Ocado.com, and will also give Ocado access to Marks and Spencer’s 12 million customers and the data of its 7 million “Sparks” membership customers.

M&S CEO Steve Rowe said: “I have always believed that M&S food could and should be online. Combining the strength of our food offer with leading online and delivery capability is a compelling proposition to drive long-term growth. Our investment in a fully aligned joint venture with Ocado accelerates our food strategy as it enables us to take our food online in an immediately profitable, scalable and sustainable way.”

Marks and Spencer has been focusing on digital and technology in recent years, and in 2018 set out plans to speed up its digital transformation as its profits continued to take a hit.

Rowe added: “Combining the magic of M&S food with Ocado’s leadership in online technology allows us to transform UK online grocery shopping by offering customers the broadest, most innovative and relevant range in UK food retail with award-winning service.”

The brand’s digital push in recent years has included investing in partnerships with retail startups through Founders Factory, partnering with Decoded to train thousands of its employees in data skills, and introducing photo searching for online clothes shopping.

Although more than half of customers will be shopping for food online by 2021, and M&S’s admission that online grocery shopping is one of the “fastest growing” channels in retail, Marks and Spencer admitted in 2018 that its online remit was well behind that of its competitors. It also said its previous attempts to enter the online market had been “uneconomic” because of the manual product-picking aspects of the trials it ran.

In the joint venture announcement, M&S said development of a more efficient system for stock-picking and replenishment, through investment in technology and fulfilment centres, would slow down its digital transformation programme and would “carry significant execution risk”.

Instead, as part of the joint venture, Ocado will transfer its retail customers, sales and supplier relationships, some vehicle assets and central retail functions into the partnership, as well as developing the end-to-end e-commerce platform, managinge third-party logistics services and taking responsibility for driver management.  

The joint venture with Ocado will allow M&S to use already-developed technology, and it said in the announcement that the partnership would help both companies through “complementary skills and assets” through the M&S food brand and Ocado’s technology.

Pureplay online retailer Ocado has been continually experimenting with technology to make the grocery delivery process more efficient. Among other things, it has trialled self-driving delivery vans and robotic picking arms.

The brand already has a 15% share of the online grocery market, offering 50,000 products to more than 700,000 customers, but brand representatives have admitted in the past that the company sees itself more as a tech company than a retailer.

Ocado CEO Tim Steiner said: “We believe this is the best outcome for customers, offering even greater range, service, quality and value; the best outcome for our Ocado Solutions partners, creating a stronger platform from which to innovate and develop our unique and proprietary technology; the best outcome for Ocado Solutions with a further endorsement from another leading global retailer; and the best outcome for our financial stakeholders, unlocking the significant value embedded in Ocado Retail. 

“The combination of Ocado and M&S will allow us to grow faster, add more jobs and create more value as we lead the channel shift to e-commerce in the UK. We are very excited by the many opportunities ahead.”

Marks and Spencer products will be available through the Ocado platform from September 2020, once Ocado’s deal with Waitrose expires.