2 August 2018 – Paris, France Financial Times, Marks & Spencer Food
M&S's same-store grocery sales fell 2.1% over Christmas, and moving into deliveries could help regain lost ground © Leo Novel/FT

Marks and Spencer has begun exploring a technology tie-up with online supermarket Ocado in a sign that the ailing British retailer could look to grocery deliveries as a way to regain lost ground as it cancels expansion plans and closes stores.

Ocado has already signed up six retailers, including Wm Morrison in the UK and Kroger in the US, to use its robotic warehouses to pick and pack customers’ online grocery orders.

People with knowledge of the talks said they amounted to early-stage discussions that might not lead to a deal. M&S and Ocado declined to comment.

Ocado is trying to reach similar deals with dozens of other supermarket groups around the world, having branched out from its original business as a niche supplier of groceries to households in southeast England.

However, the M&S talks, first reported in the Mail on Sunday, raise the new prospect of Ocado technology powering a food brand that competes head on with Waitrose, the high-end supermarket whose products fill most of the virtual shelves on Ocado’s own consumer website. The Waitrose deal expires next year.

Upmarket “food halls” had until recently been a bright spot for M&S, which has watched its clothes stores wither as a new class of global apparel retailers have advanced across British high streets with cheaper and more stylish offerings.

But same-store sales at the grocery unit fell 2.1 per cent during the Christmas trading period, worse than leading rivals. The company was last year forced to cancel plans to open new food outlets after conceding that it was unable to raise its pricey food ranges to keep pace with inflation.

M&S has stayed away from the full-scale online grocery stores offered by other British grocers, although the company has been trying out online food deliveries in areas including north London since 2017.

Analysts say the modest delivery fees that supermarkets charge are unlikely to cover the cost of picking scores of low-value items off supermarket shelves — a problem that Ocado aims to fix with robotic systems intended to cut labour costs.

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