Morrisons playing it tough with Ocado over home delivery

Morrisons’ agreement with Ocado to use its new customer fulfilment centre (CFC) in Erith, London, is far from a done deal.

Morrisons and Ocado are negotiating a deal that would see the supermarket taking space in the Erith CFC and using Ocado’s system to allow Morrisons to process customers’ online orders from its stores, which Ocado would then distribute across the UK.

However, Morrisons wants to see an expansion of Ocado’s delivery network, which until now has not covered Cornwall, the north of England and Scotland, where Morrisons has hundreds of stores.

Morrisons CEO David Potts has made no secret of his dislike of the limitations of the original deal his ousted predecessor Dalton Phillips signed with Ocado and is pushing for better terms.

The supermarket warned this week that the agreement will only go ahead if Ocado can deliver significant online growth for Morrisons.

The Erith CFC, which will have a capacity of over 200,000 orders per week, equalling around £1.2bn in annual sales, is in development and expected to open in 2017. It is Ocado’s fourth CFC and the second to use Ocado’s proprietary fulfilment solution.

The negotiations have made some progress with Morrisons announcing an “agreement in principle” this week, but the retailer warned: “This amended agreement is subject to detailed terms being agreed and will only proceed if it enables Morrisons to achieve profitable growth online. There can be no certainty that an agreement will be concluded.”