Online grocery is “a desert of profit”, M&S chairman Archie Norman has said.
“Nobody is really making true profit from food online,” he told a Retail Technology Show audience in London this morning. “There’s been more wealth destroyed by people trying to develop food online businesses than any other industry I can think of.”
His self-described “controversial” words come as Ocado Group – which signed a 50:50 joint venture deal with M&S in 2019 to form Ocado Retail – is seeking a final £187.5m payment from M&S for its share of joint venture.
The final instalment – based on specific performance targets being met – is due this month. M&S has said previously the targets have not been met. Ocado in March vowed to use “all available means” to receive the payment.
The wrangling signals a breakdown in the relationship between the two companies – something the joint venture was intended to avoid.
The former Conservative MP said that several years ago M&S had been seeking to grow its online footprint but “we looked at this and said we aren’t going to do what other retailers are doing”, as the store pick fulfilment model wasn’t feasible for the retailer.
Having known Ocado Group CEO Tim Steiner for several years, Norman told him “we’d love to do something”. Steiner responded that “as it happens” there was a break clause in its relationship with Waitrose coming up.
Norman said he warned Steiner that “one thing I don’t want to be is the same as Waitrose….Tim, you’ve fallen out with them, and I don’t want to be the next person you fall out with”. This was why the relationship took the form of a joint venture, he added.
Norman remained positive about the future of online grocery and Ocado Retail. He pointed to the fact Ocado is the UK’s fastest-growing grocer, with a third of products sold on the website are M&S own label.
Ocado Retail reported it had reached one million active shoppers for the first time in February. The joint venture revealed sales had jumped 13.9% in the year to December to £2.69bn, driven by a 12.5% rise in weekly orders.
“What do my shareholders think? They don’t think there’s a lot of value in it. Like probably zip,” Norman said. ”What do I think? I think it’s going to be worth a lot of money.”
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