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Waitrose will take on Ocado next month in the battle for affluent customers in the south east as it relaunches its home delivery service with a £10m investment.
Waitrose said an easier-to-navigate website under the Waitrose.com brand will compete directly with Ocado inside the M25 for the first time. The relaunch comes ahead of Morrisons' planned entry into the home delivery business and fresh competition from Marks & Spencer.
Waitrose.com is due to be available from the second week of March and the company will start emailing over 1 million customers on Tuesday. The supermarket, which is owned by the John Lewis partnership, claims that grocery ordering will be easier and quicker, with more delivery slots at peak times such as Fridays and weekends, and delivery drivers offering to carry shopping into the kitchen.
Ocado shares, which have had a good run recently after flopping in the wake of a lacklustre flotation at 180p last summer, are set to plummet on the news on Monday. Ocado's chief executive, Tim Steiner, sold his first big tranche of stock last week – 2m shares for £5.1m – to cash in on the 44% price rise since the float, helped by the retailer's recent move into profitability. He retains a 5% stake.
Ocado shares closed 2.1% higher at 259.3p on Friday. Investors have been cheered by its first quarterly profit, although it remained in the red over 2010 as a whole.
Waitrose's move comes as it rolls out its delivery service in London, a process that will be complete by July. It has a 10-year supply agreement with Ocado, which mainly sells Waitrose products. When the deal was renewed last May, both agreed to drop a clause that barred Waitrose from delivering within the M25 – a key battleground for retailers.
A Waitrose spokeswoman said: "We have been co-existing, or competing to use another word, for a long time. There is room for both. Our business has certainly been flourishing. We're raising the game of our online offer – groceries, flowers, gifts, home and entertainment. It's a very big investment in the entire online business."
Speculation that Waitrose would take on Ocado has swirled since the John Lewis pension trust sold its 10.4% stake in the internet grocer.
Waitrose says it will continue to be the only major online grocer offering year-round free delivery for all orders over £50. In addition to popular staples, such as a full range of Essential Waitrose items, and well known branded products – 1,000 of which are price matched with Tesco – customers will be able to navigate their way around virtual cheese, fish, meat and delicatessen counters.
There will also be "personal touch" features to replicate the service that customers get in a Waitrose branch. They can make requests to the worker responsible for picking their shopping and opt for specific numbers of items rather than a standard pack size – for example, a single onion needed for a recipe – as well as making requests for, say, green bananas or extra-thick slices of ham.
Waitrose, which has 244 shops in the UK, started offering home delivery in some branches in 2000.
Mark Price, Waitrose's managing director, said: "This investment in our online platform will dramatically enhance the customer experience so that shoppers receive the unrivalled standards of service and the personal touch they associate with our branches. With more investment planned, this new platform accelerates our progress as a truly multichannel retailer."
The move comes at a time of growing competition in the online grocery market. Supermarket group Morrisons harbours ambitions to launch its own internet delivery service, amid talk that it could be interested in Ocado.
M&S's new chief executive Marc Bolland, recently poached Laura Wade-Gery, Tesco's e-commerce supremo, to lead its online and telephone sales drive. His goal is to at least double sales from the website, by phone and via the collect-from-the-store facility – to £800m-£1bn by 2014.
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