Morrisons takes first step into online retailing

MORRISONS has taken its first step into internet retailing with the £70m purchase of online baby products seller Kiddicare.

The Bradford-based group, the UK’s fourth biggest supermarket, said buying family-owned Kiddicare gives it a launch pad for its fledgling efforts to sell products over the internet.

Morrisons plans to begin its first non-food internet sales in spring 2012, a move which could see products ranging from clothing to homewares sold via its website.

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The supermarket said Kiddicare’s established brand, plus its “highly advanced” technology, will speed up its move online.

“This deal is about establishing a platform for online,” said Morrisons chief executive Dalton Philips. “It gives us immediate and meaningful exposure to online and the opportunity to accelerate our strategy.

“The online channel is growing and Morrisons needs to understand how to compete in this changing marketplace. The opportunity is massive out there in non-food if you want to go after it.”

Morrisons is playing catch-up with its rivals on internet retailing, and is the only one of the ‘big four’ supermarkets without an online retailing presence. Mr Philips made rectifying this a key priority on his appointment early in 2010.

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Shares in the company yesterday lifted 4.75p to 279.75p, a 1.73 per cent increase.

Kiddicare, which sells goods ranging from prams to cots, was founded in 1974 by Neville and Marilyn Wright. It made earnings before interest, tax, depreciation and amortisation (EBITDA) of about £3m in its last financial year on turnover of £37.5m.

It will continue to trade as kiddicare.com under Scott and Elaine Weavers-Wright, son-in-law and daughter to the founders.

Kiddicare has grown by 75 per cent in the past three years, with internet sales now making up 80 per cent of its revenues. It also has a store in Peterborough, but Morrisons said the group has no immediate plans to sell its products in store.

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Mr Philips added Kiddicare’s technology will not be used for any launch of online grocery sales – but declined to go into detail on its plans for this.

“We see food and non-food being quite distinct at the moment,” he said. “For us food is a very different proposition.

“This (online non-food) is a channel we don’t understand very well. This is an opportunity to expand into this channel.”

Kiddicare owns a new freehold picking warehouse in Peterborough, where it has 160,000 square feet of warehouse, retail and office space.

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Finance director Richard Pennycook, who is leading the Morrisons’ online expansion, said Kiddicare’s technology stands out from rivals and is “scalable”. This includes a smartphone application and scan-and-go rapid purchase capability.

“It has some very smart automation which makes it very efficient but also in terms of customer service the accuracy is very high,” he said. “Customer feedback for the business is very good.”

He added Morrisons has “significant” scope to expand Kiddicare at the warehouse to up to four times its current size. It has also bought neighbouring land to further expand its distribution operations in future.

Morrisons, whose stores have limited floor space to expand, will update on its plans to “liberate” space instore when it reports full-year results on March 10.

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“We have a lot of stores that cannot offer space for non-food so online is a natural channel for us to explore further,” said Mr Pennycook.

Morrisons may choose to open up storage areas in stores to create room for kiosks or ‘click and collect’ points for an online food business, added Mr Philips.

Kiddicare chief executive Scott Weavers-Wright, who stays on to lead its expansion, said: “Elaine and I are extremely excited about partnering with Morrisons to accelerate the pace of future growth at kiddicare.com and look forward to working with the Morrisons team to develop their online offer.

“There are fantastic synergies between the two businesses and our platform will allow both brands to enjoy future success and to continue to deliver an unrivalled customer experience.”

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Kiddicare has over 40,00 customers monthly and employs about 130. Mr Pennycook said Morrisons beat considerable competition to land Kiddicare, and analysts believe private equity was involved in the hunt.

Mr Philips declined to comment on recent reports linking the supermarket with fashion designer George Davies, part of an attempt to create a clothing range.

john.collingridge@ypn.co.uk