ONLINE grocer Ocado is to start delivering Marks & Spencer food in a new £750million deal announced this morning.
M&S has previously not offered customers a home delivery option but the new service will be available from September 2020 at the latest.
The deal could result in lower prices for customers and the possibility of Ocado-branded products being sold in M&S stores, according to the retailer.
It brings an end to Ocado’s long-running partnership with Waitrose, which had been coming up for renewal this week.
M&S will fund the deal by selling £600million of shares and by cutting its dividend payout to shareholders by 40 per cent, but it predicts it can achieve cost savings of up to £70million a year.
Yet M&S shares were down 7.5 per cent this morning following the announcement, while shares in Ocado were four per cent higher.
The boss of M&S, Steve Rowe, said: “I have always believed that M&S Food could and should be online.
“Combining the strength of our food offer with leading online and delivery capability is a compelling proposition to drive long-term growth.
“Our investment in a fully aligned joint venture with Ocado accelerates our food strategy as it enables us to take our food online in an immediately profitable, scalable and sustainable way.”
Tim Steiner, Ocado’s chief executive, said: “This is a transformative moment in the UK retail sector with the combination of two iconic and much-loved retail brands set to provide an unrivalled online grocery offer.”
Mr Steiner denied that Ocado was getting a better deal than its partner, saying: “It’s an absolute win-win when you think of the synergies that we bring to each other’s businesses.”
Meanwhile, Neil Wilson of Markets.com, said there was a risk that customers used to Waitrose products would ditch Ocado in favour of the supermarket’s in-house delivery service.
He added that M&S’s move was “certainly bold and it gets M&S in people’s minds for online groceries at last but it just smacks of paying too much and acting too late”.
And Martin Lane, managing editor of comparison site Money.co.uk, said: “Loyal M&S customers will be elated with the news the retailer is finally stepping into the digital age by joining forces with Ocado.
“This could be the boost that M&S need to lift their food business into the modern era rather than being a top up shop on the way home.
“Ocado has proved its delivery service can work and now everyone wants a piece of the luxury pie.”
With the help of robots, Ocado can put together a shopping order of 50 items within just five minutes.
Earlier this year, Tesco and Co-op also started testing robot delivery that whizzes groceries to your door in 15 minutes.
Meanwhile, Waitrose is trialling an “in-home” delivery service that gives drivers access to customers’ homes to unpack groceries while they are out.