Online shopping - don't get left behind, a lesson some struggle to learn

There has been much written about the growth of online shopping and the effect that this has been having on the High Street. In the UK companies like HMV have seriously suffered from most of its products now being offered either cheaper online or simply in the form of a new technology that makes the old way of doing things, selling a physical product, almost defunct.  HMV is now in a serious battle to survive, which to a large degree is down to its own failure to adapt to change earlier.

In the gaming sector, companies like William Hill have stolen a march on rival Ladbrokes, with its involvement with Playtech and takeover of Sportingbet in order to enhance its online offer. Ladbrokes, turning down the opportunity to buy Sportingbet itself got left behind, it's web presence being seen as inferior, something it has now resolved to put right, the latest being a deal with Betdaq.

http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/leisure/9786343/Ladbrokes-nears-deal-with-Betdaq.html

Yet despite all the evidence of the importance of an online presence, some companies still seem to think that they can get by without it. It's even more amazing when the company happens to be in the FTSE100 and is still largely sitting on the sidelines while its competitors are enjoying massive online growth.

So, let's talk about WM Morrison.


At the moment they only sell wine and some baby products online. Given the continuing growth of online sales their neglect of this is a stunning oversight which for years even the city turned a blind eye to, until that is the bottom line started to suffer. This tells you as much about the city and their "expert" analysts as it does about the business, but Morrison's share price has been in a slump for much of the last year and while there may be several reasons for their poor performance, the lack of an online presence at a time when people are clearly looking to buy more via the web smacks of poor management decision making in the face of the obvious.

So what can Morrison's do?

A little like Tesco with its decision over Fresh and Easy in the US that gave the city something that it wanted to hear, a Morrison announcement that it plans to go online in a big way will probably see some sentiment change and the share price reverse its decline. Until then the company may find the going tough against competition that is already way ahead of it. Tesco, Sainsbury and ASDA, Morrison's main big name competitors all have well advanced online shopping options, so it makes you wonder how a major company can make such a mistake in thinking it doesn't need to do the same.

At the moment the company is involved in a share buyback that seems to have broad support. It already pays a decent dividend which in theory a share buyback helps, Vodafone are doing the same right now. Morrison is in the process of buying back around £1 billion of its shares. However, you do wonder whether the money, or at least some of it, could be better spent elsewhere like beefing up its online presence. 

This Financial Times article suggests that some of Morrison's major investors are worried about its lack of an online presence, suggesting that the company is "stuck in the past".

http://www.ft.com/cms/s/0/2bb86264-2975-11e2-a604-00144feabdc0.html (need to register to read)

But finally perhaps they have got the message?

..chief executive, Dalton Philips, said the weak trading over Christmas underlined the need to improve its online offering, convenience stores and promotional activity.

He said the company was seriously considering the launch of an online grocery store and that he would provide further details at the full-year results in March. "We are looking very closely at it; we like what we have seen so far."

Philips insisted Morrisons had not missed the boat. "This is a market where for 12 years people haven't made any money. We're not too late to the party. It's still only 5% of the market, but it is growing very quickly. In some cases, there are last-mover advantages."

He noted that online shopping grew by 20% last year, while sales at small, local stores was 6% higher. Morrisons is expanding into convenience stores and has opened 12 "M Local" shops.

http://www.guardian.co.uk/business/2013/jan/07/morrisons-sales-fall-christmas

Seriously considering?  They should have been doing that a long time ago. They may not have missed the boat, but they will have to play catch up now. However, purely from an investment or trading point of view it might be worth noting that March date for the diary.  In fact, given that Tesco's share price has seen some upward movement before an expected announcement on its loss making Fresh and Easy stores in the US, it might be worth keeping an eye on Morrison's share price before its full year results in March. Chances are the City will be expecting an announcement and sentiment could change both before and after it comes. Assuming of course, that Morrison finally sees the obvious.