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Morrisons boss Dalton Philips in bullish mood over expansion plans Morrisons boss Dalton Philips in bullish mood over expansion plans
(2 months later)
Morrisons will be able to compete on equal terms with its rivals for the first time, its chief executive, Dalton Philips, said as he revealed the supermarket chain may open up to 300 convenience stores over the next three years.Morrisons will be able to compete on equal terms with its rivals for the first time, its chief executive, Dalton Philips, said as he revealed the supermarket chain may open up to 300 convenience stores over the next three years.
He also defended his decision to sign up to a £216m 25-year deal with Ocado to use the online grocer's systems to set up a home delivery website later this year, and said he believed the online business would make a profit within four years.He also defended his decision to sign up to a £216m 25-year deal with Ocado to use the online grocer's systems to set up a home delivery website later this year, and said he believed the online business would make a profit within four years.
"It took our competitors years to build an online capacity of £500m. We've done it at a stroke. Looking at our competitors it appears to take a decade to hit profitability. We'll achieve it in four years."It took our competitors years to build an online capacity of £500m. We've done it at a stroke. Looking at our competitors it appears to take a decade to hit profitability. We'll achieve it in four years.
"By 2015 when all this is finished we will be a fully integrated multichannel business. We will be able to compete on a level playing field for the first time.""By 2015 when all this is finished we will be a fully integrated multichannel business. We will be able to compete on a level playing field for the first time."
Morrison's 500 stores will undergo a £300m technology overhaul, after Philips revealed stock was still counted manually, with staff filling out papers before inputting the data into computers.Morrison's 500 stores will undergo a £300m technology overhaul, after Philips revealed stock was still counted manually, with staff filling out papers before inputting the data into computers.
Earlier this year, the company said it would make 700 back office staff redundant as it introduced cash counting machines, having previously counted takings by hand. But he revealed 80% of those workers have been redeployed elsewhere within the business.Earlier this year, the company said it would make 700 back office staff redundant as it introduced cash counting machines, having previously counted takings by hand. But he revealed 80% of those workers have been redeployed elsewhere within the business.
Philips refused to say how many staff could end up losing their jobs because of the latest upgrades, but said he hoped many could be redeployed. He added: "We've been running a 21st-century business with 20th-century technology."Philips refused to say how many staff could end up losing their jobs because of the latest upgrades, but said he hoped many could be redeployed. He added: "We've been running a 21st-century business with 20th-century technology."
The company has been criticised in the past for being too slow to move into the convenience store market and online, the two fastest-growing areas of retail.The company has been criticised in the past for being too slow to move into the convenience store market and online, the two fastest-growing areas of retail.
On Wednesday, Sainsbury's revealed at its annual general meeting that the number of convenience stores it had open would exceed supermarkets for the first time.On Wednesday, Sainsbury's revealed at its annual general meeting that the number of convenience stores it had open would exceed supermarkets for the first time.
Morrisons plans to open 100 convenience stores by the end of the year, having bought up several former HMV, Jessops and Blockbuster sites. Philips said he would look at other companies that go bust for future expansion.Morrisons plans to open 100 convenience stores by the end of the year, having bought up several former HMV, Jessops and Blockbuster sites. Philips said he would look at other companies that go bust for future expansion.
The new stores will offer 50% fresh products, which the company said will match the prices in their supermarkets, although other groceries would cost more.The new stores will offer 50% fresh products, which the company said will match the prices in their supermarkets, although other groceries would cost more.
Philips, who joined three years ago, has been accused of not acting fast enough to secure the future of Morrisons, which has seen its market share fall in the last year. But he remained defiant, claiming he had answered his critics. "And I feel good about it," he said.Philips, who joined three years ago, has been accused of not acting fast enough to secure the future of Morrisons, which has seen its market share fall in the last year. But he remained defiant, claiming he had answered his critics. "And I feel good about it," he said.
Although Philips refused to blame his predecessor Marc Bolland – now in charge of Marks & Spencer – for failing to introduce new technology or an online business when rivals were forging ahead with their own, he agreed Morrisons had fallen far behind.Although Philips refused to blame his predecessor Marc Bolland – now in charge of Marks & Spencer – for failing to introduce new technology or an online business when rivals were forging ahead with their own, he agreed Morrisons had fallen far behind.
"When I arrived there were no plans for online, no plans for convenience and systems that were from the last century. Three years on we are putting in 21st-century systems and we are very aggressive on our convenience business."When I arrived there were no plans for online, no plans for convenience and systems that were from the last century. Three years on we are putting in 21st-century systems and we are very aggressive on our convenience business.
"Defying gravity becomes a lot harder. We could have done nothing and let our business go into slow but inevitable decline.""Defying gravity becomes a lot harder. We could have done nothing and let our business go into slow but inevitable decline."
The new convenience stores will be mainly focused in the south-east, an area where Morrisons has little market penetration, and will open new central London sites.The new convenience stores will be mainly focused in the south-east, an area where Morrisons has little market penetration, and will open new central London sites.
The online business is set to launch in January, after localised trials are expected to be rolled out in the autumn. But the company still needs to decide where its spoke delivery sites will be, particularly around London, for deliveries from the distribution centre in the north of England.The online business is set to launch in January, after localised trials are expected to be rolled out in the autumn. But the company still needs to decide where its spoke delivery sites will be, particularly around London, for deliveries from the distribution centre in the north of England.
Morrisons will become the last of the big four supermarkets to enter a £5.6bn-a-year online market that us expected to double in size by 2017.Morrisons will become the last of the big four supermarkets to enter a £5.6bn-a-year online market that us expected to double in size by 2017.
Clive Black, retail analyst at Shore Capital, said he thought moving into online and convenience stores was long overdue for Morrisons, but cautioned the supermarket not to expand too quickly.Clive Black, retail analyst at Shore Capital, said he thought moving into online and convenience stores was long overdue for Morrisons, but cautioned the supermarket not to expand too quickly.
"The key thing is to get the right locations," he said. "We would have some reservations about the quality of some of the stores they've chosen. We would like them to take their time in terms of site evaluation. Tesco and Sainsbury's can't open everywhere, so there's space to enter the market.""The key thing is to get the right locations," he said. "We would have some reservations about the quality of some of the stores they've chosen. We would like them to take their time in terms of site evaluation. Tesco and Sainsbury's can't open everywhere, so there's space to enter the market."
Philips also called on the government to review business rates, adding his name to a long list of retailers concerned that high rates could destroy the high street.Philips also called on the government to review business rates, adding his name to a long list of retailers concerned that high rates could destroy the high street.
He said: "Business rates are too high. If they continue to rise they will put more shops out of business. We want a thriving high street and the government has to look at how business rates are calculated."He said: "Business rates are too high. If they continue to rise they will put more shops out of business. We want a thriving high street and the government has to look at how business rates are calculated."
His suggestion that an online tax may be a solution is at odds with his business partners Ocado. Its chief executive, Tim Steiner, said high street retailers needed to "shut more shops and stop moaning".His suggestion that an online tax may be a solution is at odds with his business partners Ocado. Its chief executive, Tim Steiner, said high street retailers needed to "shut more shops and stop moaning".
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