Ocado and Morrisons recalibrate partnership, focusing on AI-driven in-store tech

Ocado has revealed plans to intensify collaboration with Morrisons in-store, while scaling back on the use of fulfilment centres as Morrisons restructures its online grocery sector.

Since their partnership began in 2013, Morrisons will "gradually cease" using Ocado’s Erith fulfilment centre in the south east, according to a statement released by Ocado this morning, as reported by City AM.

The strategy includes increasing volumes from Ocado’s Midlands fulfilment centre and expanding Morrisons' store network where online orders are processed using Ocado’s advanced AI-powered in-store technology.

Rami Baitiéh, CEO of Morrisons, explained that the move is in response to a surge in demand for the supermarket's online services. "In-store fulfilment... gives our customers full access to our unique Market Street offer. Morrisons.com will continue to service every postcode in England, Wales and Scotland, with no impact to customers," said Baitiéh.

Tim Steiner, CEO of Ocado, commented on the partnership: "With our world-leading technology, Ocado Retail and Morrisons offer amazing propositions in the UK online grocery market."

He further noted that as Morrisons reduces operations at Erith and boosts volumes elsewhere, Ocado will work to ensure a smooth transition and maintain strong market share growth throughout the UK with the Ocado Smart Platform. Steiner also mentioned that easing the load on the Erith centre will facilitate growth for Ocado's online retail branch.

"As Ocado Retail moves towards full utilisation of existing capacity, this decision enables a helpful option to provide it with further short-term growth, without an expectation for additional capex," he said.

Ocado has poured significant investment into tech but its grocery division has faced challenges post-pandemic – boasting a 2021 peak market cap of £22bn, the company's valuation now stands at around £3bn.

Earlier this year, major brokerage firm Bernstein shifted its stance from ‘outperform’ to ‘underperform’, slashing its price target from 1,000p to 250p and noting that they were "having been one of the last bulls standing."

Despite the downward review, sales have recently been on the rise again, in part thanks to a fresh joint venture with M&S.