The big news in retail this week is that Morrisons has finally taken a step towards e-commerce and while buying the Kiddicare.com is a relatively small move, what it means for Morrisons is huge.
Morrisons has long been accused of lagging behind its rivals, which all have slick online models.
And while on one hand it’s laughable that one of Britain’s biggest retail groups could be without an online business until now, on the other hand it also means that Morrisons avoided pouring money into testing and developing platforms and making mistakes along the way. It can take a step back and look at who is doing what, and doing it well.
Under Marc Bolland’s leadership, now M&S CEO, Morrisons stayed away from online because it is so tremendously difficult to make it profitable.
By buying a non-food platform, Morrisons is hinting that its ecommerce strategy is one of acquisition, rather than developing its own online operations.
This acquisition model makes sense as a strategy for Morrisons because the cost and time it would take to develop its own system would be immense.
This acquisition model makes sense as a strategy for Morrisons
With the Kiddicare acquisition, or as CEO Dalton Philips refers to it, the partnership, Morrisons has bought a tried and tested online and distribution platform that gives it the technology and the capability it needs to launch its own e-commerce proposition.
The challenge it faces now is how to apply the Kiddicare platform to its own ranges and integrate that with its store portfolio.
Morrisons is staying tight lipped about any moves into online grocery and Philips and his financial advisor Richard Pennycook are quick to point out that they see food and non-food as very different online businesses.
There have been rumours floating around for months about the possibility that Morrisons will buy online grocer Ocado. A move which on the surface would make sense, but if you dig deeper could prove to be an exceptionally expensive entry point into online grocery.
Kiddicare set Morrisons back £70m, for a business that made sales of £37.5m last year. Buying Ocado would cost around £1.4bn and there is the added obstacle in the shape of its deal with Waitrose.
It may not be the all-encompassing online operation many were expecting Philips to reveal but Morrisons has definitely made a strong start in its online strategy. It may be the last to join the party but there is no end to the options open to Morrisons.