Morrisons faces online dilemma

When Dalton Philips steps into the role of chief executive of Morrisons (having joined from Loblaw) on Monday he will soon be hit with questions about when he plans to lauch an online store. City analysts and the media all know that Morrisons stands alone in failing to capitalise on the internet.

Philips: ready to convince the board to launch online store?

What is less well known is that under predecessor Mark Bolland, Morrisons had a team working for some months on a strategy for the group’s entry into selling non-food goods online. The relevant people from around the company and the various agencies Morrisons uses were all brought together to develop the idea.

They worked on deciding the categories (stationery, toys, cookware, entertainment, electronics and mobile phones) and after some months took the idea to the conceptual strategic discussion stage.

Various board presentations were undertaken and 12 months ago it was at the sign-off stage. But it was knocked on the head and the reason given was that the board did not want to go with non-food first online. The preference was to start with food as that fitted the broad strategy of Morrisons being the ‘food specialist for everyone’.

They instead wanted to try and take the well regarded ‘Market Street’ in-store fresh food offer online. But this is a tough one compared with building a non-food internet offer where the barriers to entry are very low.

With the same Morrisons board in place it looks like Philips will have his work cut out to convince them to go with non-food first – even though a lot of the foundation work has already been done.

Morrisons has smaller average store size than major rivals

This is a big worry because Morrisons is hampered by having smaller sized stores than its rivals and so non-food represents a good opportunity for quick growth. In contrast, having to wait to get food off the ground first is much less appealing and the City will no doubt air its concerns to Philips and the board.