Morrisons chief executive Dalton Philips says the supermarket is missing out on £700 million of online sales by not being in the market.
The chain, which plans to launch an online service in January, has calculated the size of the opportunity relative to its larger peers, Tesco, with food delivery sales of over £2 billion, and Asda and Sainsbury's, both of which have sales of about £1 billion.
The supermarket has agreed a 25 year partnership with delivery specialists Ocado and has leased the online firm's distribution centre in Dordon, Warwickshire. The deal has been calculated to cost Morrisons £216 million but Philips said over 25 years the firm would spend more than that on tires for its distribution lorries.
Morrisons is planning a limited test of the service to a number of customers in the Midlands today according to The Mail on Sunday's financial pages today. The trial will take place around the Midlands and will be designed to test the new web site and the distribution centre's systems.
Morrisons has bought the warehouse and is leasing half the warehouse back to Ocado for its own service. The half it still owns will give Morrisons capacity for £500 million online orders per year. Once the centre is at full capacity the two firms will open more sites.
Philips said this week he would develop a London 'spoke' from the Dordon centre, that would include using Ocado's existing satellite centres such as West Byfleet in Surrey, that would allow it to service the lucrative London market.
Morrisons only has a market share of about 6.5 per cent in London - less than half its national share of the grocery market - but online and convenience stores will help increase that, he said.
Ocado is providing the technology, warehouse, staff and vans but the service will feature all the Morrisons branding and only delivery Morrisons food. Ocado has said its existing service with Waitrose would be unaffected.
However, Waitrose managing director Mark Price has said he is uneasy about the Morrisons agreement and asked his lawyers to examine the situation for potentialk breaches of contract. Ocado has agreed to delivery Waitrsoe products until 2020 but there is a break clause at 2017. Waitrose also runs itsa own separate service from stores and internet-only warehouses - the same strategy as Tesco, Asda and Sainsbury's.
Philips said at a press conference last week that the chain has spent about £300 million hauling the IT systems 'into the 21st century'.
He said in some stores cash was still being counted by hand at the end of the day and stock was being checked using pen and paper. But he said these were in the process of being phased out by January next year in favour of electronic counting machines and iPads.
He said it was the only retailer of its size in the world still using paper to manually check stock in stores and monitor empty shelves.
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