Grocer is late to the game as Argos shows how it’s done

 
Elizabeth Fournier
BOTTOM LINE

EARLIER this week, I doubt many analysts would have stuck their necks out and predicted it would be retail stocks driving the FTSE to yet another five-year high yesterday.

But as Ocado, Morrisons and Home Retail have proved, sometimes even the most unlikely of success stories have the power to impress.

Ocado in particular was driven close to its float price by news of a potential deal to deliver Morrisons products to online shoppers, and while Ocado’s all-time highs of 290p were hit in early 2011, it is an impressive recovery by the firm that was plumbing the depths of 56p just four months ago.

The market has wanted this deal for months, and though it has a slight air of desperation it may just have come soon enough to make Morrisons’ frenzied rush to catch up with its competitors worth the time and money.

Along with plans to open 100 convenience store in the next few months, the group’s belated commitment to online retail shows it is finally ready to square up to its rivals, having spent the past few years toiling to make its purchase of 38 Co-op and Somerfield stores work at a time when traditional retail models are on the decline.

For both parties, this looks like a hastily arranged marriage of convenience that might just work out. Ocado gets the stability investors want ahead of its Waitrose contract expiring in 2020, while Morrisons gains the knowledge the delivery firm already has from 10 years of operating in a brave new market.

Only time will tell if Morrisons’ delay in committing to online will work in its favour, but there are certainly lessons to be learnt from rivals’ earlier forays into the delivery business.

If the grocer can take the best bits of its family-friendly market street model and merge them with Ocado’s status as the yummy mummy’s favourite white van man, the outcome will definitely have been worth the wait.

Meanwhile Argos (see p7), once the preserve of catalogue shoppers in search of a cheap kettle, has quietly been emerging as a unexpected innovator in multi-channel retailing.

It has both managed to fill the high street gap left by Woolworths’ collapse in 2008, while simultaneously pioneering a website that has been quick off the mark to offer customers inventive solutions such as online stock checks, and the click-and-collect service – introduced more than 12 years ago – that has been widely adopted by its peers.

The retailer is targeting 50 per cent of sales via online by 2015, and with 43 per cent already coming via its easy-to-use website it is not hard to imagine Argos hitting that goal.

No wonder chief executive Terry Duddy vowed yesterday he had no intention of ceding power to Argos MD John Walden just yet. Home Retail Group may not be the jewel in most investors’ crowns just yet, but Argos is fast becoming Duddy’s.

Elizabeth Fournier is City A.M.’s news editor @ej_fournier