Marks & Spencer(M&S) will acquire a 50% stake in Ocado’s UK retail business for up to £750 million ($994 million) in a joint venture that will give M&S a full online food delivery service, according to Reuters. The business will start delivering M&S products by September 2020 at the latest, when Ocado’s current deal with Waitrose expires.
The deal allows Ocado to continue supplying its own private label products and branded goods in addition to M&S items, creating a combined assortment of 50,000 items. Waitrose will shift to focusing on its own internal delivery business, which the retailer aims to double in size within the next five years.
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While M&S currently sells wine, flowers and apparel online, the retailer does not yet offer food delivery. This puts the chain at a disadvantage in the UK, where online grocery sales are expected to grow 52% in the next five years to £17.3 billion, according to grocery industry research group IGD.
Grocery retailers around the world have been partnering with third parties for their delivery needs. These deals help them launch these services more quickly, and at lower order volumes, than they could manage by themselves, according to Jack O’Leary, Senior Analyst at Edge by Ascential.
“Instacart has shopper networks in all the cities they’re operational in, and they pick the items off the store shelves and deliver them to the shopper,” said O’Leary in an interview with Retail TouchPoints. “They also have an Instacart brand name that brings shoppers to your platform and creates demand. All of this allows a retailer to get their grocery program off the ground at a much more rapid pace than building it themselves.”
Instacart has delivery deals with multiple large chains, including Kroger, Aldi, Costco, Sam’s Club, BJ’s Wholesale Club and Albertsons.
Even Walmart is partnering with third parties to expand its grocery delivery options. The retail giant is tapping Postmates, DoorDash, Point Pickup, Skipcart, AxleHire and Roadie to help expand its delivery network to 1,600 stores by the end of 2019.
