Morrison looks to suppliers for web push

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Wm Morrison is demanding millions of pounds from suppliers to support its move online, as it reported worse than expected trading.

Morrison is preparing to begin selling groceries online in January, in Warwickshire, quickly followed by Yorkshire, through its £200m partnership with Ocado, the online grocer.

Britain’s fourth-biggest supermarket chain by market share recently asked suppliers to support the launch, requesting an average of about £2,000 from suppliers for each line to be sold on, according to people familiar with the situation.

The figure, which could run into millions of pounds in total, was to cover costs such as photographing goods for the website, the people suggested.

Morrison confirmed it was talking to suppliers, but declined to comment on the details of its request.

Trevor Strain, finance director, said the chain was investing heavily in the online and convenience store markets. That would benefit Morrison shareholders, but it would also mean more business for suppliers.

“Volume growth is the lifeblood of any supplier in the retail business. Suppliers will want to access that growth and benefit from that growth. We will be having conversations with suppliers,” he said.

The comments came as Morrison said sales from stores open at least 12 months fell 2.4 per cent year on year, excluding fuel, in the 13 weeks to November 3. This is a bigger decline than that forecast by Jefferies, broker to Morrison, which had pencilled in a 2 per cent contraction, and comes on top of a 2.1 per cent fall in the year earlier period.

Dalton Philips, chief executive, blamed the worse than expected like-for-like performance on a slowdown across the grocery market as cash-strapped consumers reined in spending, as well as the absence of a “payday bonus” loyalty promotion over the summer months.

“We flagged back in September it would not be a straight line,” he said.

However, he said he expected Morrison to deliver positive like-for-like sales in the three months to the end of January, the first underlying growth for about 18 months, despite the threat from rivals seeking to hamper its progress over the festive period.

“We know that it is going to be a very competitive market, and it always is at this time of year,” said Mr Philips. “We are just feeling more comfortable with our direction of travel, and we are signalling that we have seen a certain level of confidence as we go into this quarter. We are exiting [the third quarter] with stronger momentum.”

However, he warned that the real turning point for the supermarket chain would not come until 2015.

He said there was a 1.5-2 percentage point drag on Morrison’s like-for-like sales, from being late moving into online grocery and not having a sizeable small store estate, whereas some rivals had been in the convenience market for close to two decades.

Morrison will have 100 convenience stores by the end of January, and will open another 100 in the next financial year.

Morrison shares closed down 0.3 per cent at 280.1p.

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