Summary

• On 1 September 2020, the complete range of M&S food items were available on Ocado’s online platform for shopping and delivery.
• The partnership strengthens M&S’s focus on online business to suit the changing customer behavior towards online grocery shopping.
• Ocado’s customers to get similar or higher quality products at same or better deal along with a complete product range from M&S, says the company.
• While M&S food range would include 6,000 products, its every day clothing and home lines would comprise of 800 products.
• After partnering with M&S, Ocado split with Waitrose as its delivery partner for around two decades.

In its efforts to suit the rapidly changing customer behaviour towards online grocery shopping, Marks & Spencer’s (M&S) has undertaken a crucial partnership with Ocado to provide its wide range of products delivered to the customers beginning 1 September 2020.

As part of the partnership between Marks & Spencer Group plc (LON:MKS) and Ocado Group plc (LON: OCDO), the products from M&S, including the completerange of food products, would be exclusively available at Ocado.com. To bring this service to the customers, the two companies have worked closely over the past one year with focus on going digital, developing latest range of products to suit the customer demands, and supply chain intricacies.

Benefits for the customers

In addition to the customers getting to purchase M&S products online, Ocado’s customers would get similar or higher quality products at same or better deal along with a complete product range from M&S.

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Ocado Retail is known to provide a sustainable service to the customers. The company’s unique technology solutions offer more than 97 per cent correct and on-time deliveries. In addition, its offers include a reduced carbon footprint way for shopping both in terms of emissions and food wastage. The retailer maintains an increased level of hygiene, suggesting lesser handling of products duringfulfillment and delivery process.Ocado is planning to invest in ramping up its capacity by 40 per cent in 2021 and more during the subsequent years. At present, the company services approximately 74 per cent of the entire population in Britain.

Talking about the rise in online shopping, Melanie Smith, CEO of Ocado Retail said that it would look ahead to see what the future brings as shoppers are increasingly shopping on online platforms. Agreeing with Smith on the increase in online shopping behavior of the customers, Stuart Machin, MD of M&S Food said that the customers would get a wide range of products being offered by the company. M&S would remain focused both on quality and value, added Machin.

Details of the partnership between M&S and Ocado

M&S has bought a 50 per cent share in Ocado, providing it with an opportunity to place its complete range of food products online at Ocado’s website. This would be the first time when entire products from M&S could be shopped online. In February 2020, Ocado announced that it was entering into a £1.5 billion delivery partnership with M&S. Ocado also said that it would end its 20 years association with Waitrose as its delivery partner.

Ocado has substituted the earlier essential Waitrose products with like-for-like products from the M&S Remarksable Value range. Ocado assured that the new product range on its website would be available at a same price or would cost lesser than the Waitrose items. Waitrose & Partners, a group company of the John Lewis Partnership is a supermarket brand of the UK that sells groceries.

It is to be noted that before starting the delivery with Ocado, few products from M&S such as party food werebeing deliveredonline to some locations in the UK. Apart from this, around 130 of its food and household items were available on Deliveroo, a London-based online food delivery company.

M&S decided to partner with Ocado to focus more on the growing business segment of online shopping. The coronavirus-led crisis and lockdown that forced the businesses to shut their shops has hurt the sales at M&S and the retailer recently announced to cut 7,000 jobs. The rise in online shopping in the UK over recent past was accelerated further due to the coronavirus pandemic. Established in 2002, Ocado at present claims to reach around 90 per cent of the postcodes in the UK.

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The partnership between M&S and Ocado has left Waitrose in a tough situation, especially when the coronavirus pandemic has triggered a major shift in online shopping behaviour among the Britishers. Waitrose management said that it sees breaking apart with Ocado as a massive opportunity to attract customers on its own online platform.The retailer would revamp its online business to meet the customer’s needs for home delivery of grocery items. The company stressed that the coronavirus pandemic has necessitated the need to increase focus on online business segment, which was traditionally also not underplayed.Waitrose informed that it plans to enter into new partnerships with third-party delivery operators. The supermarket chain has begun a trail with Deliveroo from five stores from 1 September 2020. John Lewis Partnership, the parent company for Waitrose also stated that it would give increased attention to grow the online business segment in coming times and strategise accordingly.

Stock market’s reaction on the first day of partnership

Let us have a look at how the two company’s stocks performed on the day when they began their partnership.

Marks & Spencer Group plc: On 1 September 2020, at 12.56 PM, the company’s stock(LON:MKS) was trading at £106.20 down 4.41 per cent from Friday’s close of £111.10. The 52 week low high range was recorded as 85.04 and 228.90. With a market capitalisation(Mcap) of £ 2,170.21 million, the stock provided a negative return on price, which was minus 48.54per cent on a year to date (YTD) basis. The total volume of shares traded at the time of reporting was recorded at 8,838,630.

Ocado Group plc: On 1 September 2020, at 13.01 PM, the company’s stock(LON:OCDO) was trading at £2505.00 up 0.32 per cent from Friday’s close of £2487.00. The 52 week low high range was recorded as 1,064.00 and 2,535.00. With a market capitalisation (Mcap) of £2,170.21 million, the stock provided a positive return on price, which was minus 98.25per cent on a year to date (YTD) basis. The total volume of shares traded at the time of reporting was recorded at 800,947.

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Conclusion

The partnership between M&S and Ocado for online delivery of products from M&S strengthens the rising trend of online shopping in the UK. Many retailers and supermarket chains are reviewing their retail business strategies to meet the changing needs of its customers. The increased focus on online business is expected to increase the retail sales and customer demand. The coronavirus pandemic has accelerated the shift in online shopping because of the health advisory regarding social distancing norms. Market experts predict that this increased shift would continue even after the coronavirus pandemic decimates.