Under the agreement, the grocer will provide a wholesale supplies to Amazon, giving customers of its Prime Now and Pantry services access to a “wide range” of fresh, frozen and packaged goods.
Morrisons said the deal would complement its bricks and mortar stores and enable it to grow sales volumes by tapping into its manufacturing, distribution and wholesale capabilities.
Chief executive David Potts said: “Today’s agreement is built on Morrisons’ unique strengths as a food maker. The combination of our fresh food expertise with Amazon’s online and logistics capabilities is compelling.
“This is a low risk and capital light wholesale supply arrangement that demonstrates the opportunity we have to become a broader business. We look forward to working with Amazon to develop and grow this partnership over the coming months.”
John Ibbotson of consultancy Retail Vision said: “With the Amazon deal, the struggling grocer Morrisons has been granted an 11th hour reprieve.
“It’s now game on for the rest of the Big Four, who suddenly don’t look so big after all. Tesco could soon be about to find out what it’s like to be David rather than Goliath.”
He added: “This deal is the final link in the chain for Amazon to launch Amazon Pantry and take on the Big Four by delivering a full grocery offer including fresh and frozen food.”
Morrisons also announced today that it has reached an agreement in principle with Ocado to take space in the online grocer’s new customer fulfilment centre in Erith, Kent. At the same time, Ocado would provide Morrisons with the software needed to fulfil online orders from its stores.
Although both parties stressed that there was no certainty that a final deal will be agreed – with Morrisons saying it would only go ahead if the tie-up helps it achieve “profitable growth online” – Ocado chief executive Tim Steiner said: “This is a win-win arrangement which allows both of us to grow faster, and more profitably, in a grocery market where channel shift is now an unquestionable reality.
“This potential deal demonstrates Ocado has the technology and know-how to help partners grow their online businesses rapidly and successfully, and take advantage of consumers’ increasing desire for the convenience, choice, quality and value offered by online shopping.”
Ocado’s Erith facility is due to go live at the end of next year and is expected to have the capacity to handle 210,000 orders a week.