Morrisons playing retail technology catch-up

Morrisons announced its half-year results on Thursday 12 September, with its report indicating how significant investment and progress is being made in bringing the supermarket group into the multichannel retail world.

The business's first online retail site is scheduled to go live by the end of January 2014, thanks to its partnership with e-tail grocer Ocado, but Morrisons' investment in technology over the last six months goes far deeper than a new transactional website.

Overseen by CEO Dalton Philips, Morrisons has been undertaking an entire IT upgrade in the last couple of years, with the supermarket saying this week that the current financial period will represent the peak of its investment phase as it looks to position itself for growth and heightened efficiency in time for 2014/15 and beyond. 

Investment in tech equipment for staff to use and expenditure on systems to enhance supply chain operations had a significant impact on the supermarket's bottom line in the first half of the year. The £216 million capital investment in the Ocado e-retail deal, of which £171 million was incurred this period, largely contributed to profit before tax falling from £440 million to £344 million.

Total sales were flat at £8.9 billion, with like-for-like trading down 1.6% compared to the same period in 2012.

So as the supermarket looks to put itself in a position for growth, what technology changes await Morrisons' staff and customers in the months ahead? One intriguing recent systems update comes in the form of tablet devices for order management, which will allow store managers to place orders directly with the supply chain.

Replacing what up until recently was a manual process, the tablets have already been implemented in 25% of Morrisons' stores and will be placed in the entire retail estate by the end of the financial year.

Steve Dresser, director at retail analysis firm Grocery Insight, said that it is "remarkable" how Morrisons has traded and performed so well considering it has been using what even the company itself has admitted are outdated systems.

"The e-tablets are a good addition to the store and their flexibility will allow store managers to get emails and planograms on the tablets in future, I'm sure," he noted. "With ordering moving to these tablets, it allows greater efficiency and more control on the shop floor."

Another move the company has made with efficiency in mind is to introduce electronic cash counting systems in-store. Prior to this change, cash was counted manually on a daily basis.

The technology systems in the supermarket's meat manufacturing business have already been transformed, but work is currently underway to revamp all aspects of commercial and retail operations, including the introduction of a central data platform where store, product and sales information will be housed together.

But why has Morrisons, which operates almost 500 stores across the UK, been so slow to modernise its systems and bring its technological capabilities up to 21st century retail standards?

Dresser explained that Morrisons operations are "notoriously complex" due to its unique vertical integration supply chain format which sees the retailer owning the majority of its supply chain. He said that this adds a layer of complexity compared to traditional retailers, and the business is right to be cautious.

"Morrisons has taken a very prudent approach and this is standing it in good stead, with the majority of the facilities now on the new platform," he argued.

"News of a new convenience store platform will help ranging too, enabling local tastes to be catered for, which is vital for the convenience sector."

CEO Philips said on Thursday that the company's strategy for growth in online retail and the rapidly expanding convenience sector "is now set", which includes a number of new store openings in the south of England, where it has traditionally been under-represented, and new distribution facilities in the north.

"We've been working at pace on our online offer – the final pillar of our strategy," he added.

Morrisons, it seems, is on target to becoming a very different looking business by the end of its financial year. Implementation of new technologies, ranging from consumer facing eCommerce systems to back office ordering tools, are being introduced to aid the Yorkshire-based grocer's push to become a truly multichannel retail player.