• Ocado will develop a store pick offer for Morrisons allowing the grocer to fulfil online orders nationwide
  • Morrisons’ profit share with Ocado to fulfil its online orders will be waived once its store pick model becomes operational
  • The grocer’s research and development fee to Ocado will also be reduced once it takes on capacity at the etailer’s automated warehouse in Erith

Morrisons has renegotiated its agreement with Ocado allowing the grocer to fulfil nationwide online orders in-store at a reduced cost.

The online grocer will develop a store pick offer for Morrisons, giving the supermarket chain the ability to assemble orders placed online directly through its own stores across the UK. 

Under the agreement, Morrisons staff will physically pick goods from its stores, with Ocado providing and maintaining the software platform.

Once the programme is operational across the grocer’s portfolio, Morrisons’ current agreement to share a proportion of the profits from its online sales with Ocado will be scrapped.

The move paves the way for Ocado to offer its fulfilment services to other UK grocers, although under the terms of the deal with Morrisons, the etailer will not be able to partner with the Bradford-based grocer’s big four rivals Tesco, Sainsbury’s and Asda, or discount duo Aldi and Lidl.

The research and development fee Morrisons pays to Ocado will also be reduced once it takes on capacity at the etailer’s automated warehouse in Erith, in Kent, which is expected to be launched during the online grocer’s 2018 financial year.

Morrisons will also increase the range it offers through its website, introducing thousands of non-food items that are currently available via Ocado.

The grocer said the renegotiated deal “has significantly lower upfront capital costs than the original operating agreement and includes an option to break after five years”.

Its chief executive David Potts said: “The new investments in online growth are further examples of Morrisons building a broader business and will allow millions more customers all over Britain to enjoy Morrisons’ good quality fresh food and great value for money.

“As food-maker and shopkeeper, we continue to ‘follow the customer’ and move towards achieving capital-light, profitable growth online.”

Ocado boss Tim Steiner lauded the deal as “a win, win outcome for outcome for both parties.

He added: “I am delighted to announce this extension to our agreement with Morrisons, which will provide them with additional capacity for the growth of their online business, supported by our proprietary technology and infrastructure solutions.

“We see this agreement as a further endorsement of the strength and attractiveness of our capabilities that we can provide to our existing UK partner, and for retail partners globally.”