‘Avocados at dawn as M&S and Waitrose prepare for clash after Ocado switchover’

When M&S used that label to describe the £750m investment, nobody knew that it would make its debut at a time when not just retail but everyday life had been transformed by the Covid-19 pandemic.

Shoppers have flocked online. Even though most retail sales still go through stores, M&S’ lack of presence in grocery etail was an Achilles’ heel at a food division that has been doing well overall. As the launch date for the Ocado joint venture looms, the deal takes on even greater importance than was previously envisaged.

“Ocado customers’ loyalty means M&S is teaming up with a strong, growing business”

Last Tuesday, when M&S said it would cut 7,000 roles as it speeds up its own transformation, the retailer reported food sales up 2.5% in recent weeks. Food like-for-likes, excluding branches such as those in travel hubs that are still shut, rose 10.6%.

So M&S is in a pretty good place as its partnership with Ocado begins for shoppers. The link-up incidentally has also brought benefits “in the form of trading terms and the launch of over 500 new products in M&S stores from the expanded online range created for the switchover”.

Ocado too has shown its prowess during the period of the pandemic. Last week’s Kantar grocery data revealed “another new record market share” for online in the latest four weeks, when 13.5% of all sales were ordered online. Kantar observed that “Ocado has been a major beneficiary” as the etailer clocked up market share of 1.8% and sales growth of 45.5%.

High standards

There’s just one problem. The surge in online demand was too much to handle for Ocado in the early stages of lockdown and it had to close its site to new customers.

While turning away trade is a retailer’s nightmare, there is something to be said for Ocado’s prioritisation of existing customers back in March. Everyone is familiar with the annoying offers, often from financial services companies, that offer preferential terms for new customers, leaving long-time customers feeling their loyalty is taken for granted. 

But Ocado’s stance strengthened some of its key appeal to customers, such as reliability and high service standards. In Ocado’s first half, running to the end of May so including a substantial part of lockdown, product substitutions were less than 4% and 97% of orders were delivered on time. 

“It will be a few months, probably longer, before it will be clear whether the deal has truly been transformational”

Such high standards are partly what M&S is paying for with Ocado and are in tune with its own heritage. Ocado customers’ loyalty means M&S is teaming up with a strong, growing business. It must be hugely frustrating that M&S customers may not be able to order through the JV – even if they can sign up to do so in future – when M&S’ range goes on sale next week.

Meanwhile, Waitrose, Ocado’s original partner, is now at daggers-drawn. The John Lewis Partnership-owned grocer has launched a marketing campaign designed to “bring home Ocado shoppers to Waitrose.com”, and said its own online division is “on track to treble its size to become a £1bn business in its own right by the end of the year”.

Waitrose’s cheeky social media message is ‘thank you Ocado, we’ll take it from here’, emphasising that its food will only be available in its stores and on its website from the start of next month. The text is accompanied by an image of freshly cut avocado – a reference perhaps to the origins of Ocado’s name, which according to some was inspired by the fruit.

M&S’ online push may be more of a slow burn than originally envisaged, certainly as far as catering for new customers is concerned, but that should not be seen as a disaster. It will be a few months, probably longer, before it will be clear whether the deal has truly been transformational. In the meantime, get out the popcorn – or the guacamole – and prepare to watch the clash of the middle-class grocery titans.