Morrisons buys Kiddicare for £70m

“I helped refocus the Morrisons eCommerce strategy to exploit the newly acquired online business,, and led a number of projects to integrate the operation into the wider Morrisons business.”

 The Guardian: 15 February 2011

KiddicareSupermarket chain Morrisons announced the acquisition of fast-growing internet retailer Kiddicare in a £70m deal that it said would give it the know-how to sell clothing and homewares online.

Morrisons is the only member of the “big four”, which includes Tesco, Asda and Sainsbury’s, that does not have a substantial internet business.

Chief executive Dalton Philips billed the acquisition as “first step” into e-commerce but cautioned that the deal did not signal plans to launch a full-blown internet grocery service as the baby goods website does not use “food related software”. “I see food and non-food as very distinct,” said Philips. “This is our first foray into learning about a channel we don’t understand very well.

Food is a very different proposition.”Morrrisons set the pace in the sector for two years after its 2004 takeover of Safeway but it is now on the back foot as growth petered out last year. Philips, who was hired from Canada, is keen to enter faster growing areas of the market such convenience retailing and home shopping.

The Bradford-based grocer is behind the curve because former boss and founder Sir Ken Morrison shunned anything other than large supermarkets and dismissed home delivery “as something he had done on his bike as a young man”.

Morrisons said it made “good commercial sense” to buy rather than build a website from scratch as the development process could be “painful”. Kiddicare’s technology is at the vanguard of home shopping and the grocer said it had fought off private equity firms to get its hands on the business. It has an iPhone app that lets customers scan barcodes and Philips said its hi-tech warehouse in Peterborough used “very smart” automation that made it extremely efficient. The company offers customers one hour delivery slots.

The purchase opens numerous doors for the grocer as Kiddicare’s multi-channel expertise will underpin the Morrisons non-food website, which it said would launch next spring, and raise its expertise to expand its range of in-store products. Kiddicare, which sells everything from cots to car seats and nappies, uses Argos-style kiosks which could be deployed as part of a “click and collect” service.

Philips said having Kiddicare under its wing would also help it to attract more families with young children. They are high spending, frequent shoppers with whom the grocer does not punch its weight. Sales at the fast-growing company, which books 40,000 orders a month, have increased 75% in the past three years, to hit £37.5m last year. It was also profitable with earnings before financial charges of £3m.

Morrisons said the website will continue to trade separately as, led by Scott and Elaine Weavers-Wright, the son-in-law and daughter of the founders. Signalling the scale of the opportunity the grocer said its warehouse could handle £150m sales and that it had acquired the surrounding land to enable growth beyond that.

Analysts said the acquisition was sensible but “not exactly cheap”. The shares closed up 5p at 280p.

The UK non-food retail market, which takes in clothing, furniture and electricals is worth £165bn and Verdict analyst Neil Saunders said Morrisons “had a lot of catching up to” as Tesco’s non-food sales have reached £9bn. “Clothing is the biggest part of the non-food market,” he said. “If you are serious about non-food you can’t do it without a credible clothing offer.”

Philips said it would be logical to expand Kiddicare’s focus from baby goods to other product areas such as clothing for older children but declined to comment on speculation it is in talks with designer George Davies to launch a fashion range.

Kiddicare is a family affair. The firm was started by Neville and Marilyn Wright in 1974 as the baby products supplier Rainbow but is now run in Peterborough by daughter Elaine Weavers-Wright and her husband Scott, an IT consultant who helped the firm make the leap to the internet. The family were outright owners and share the £70m windfall from the sale to Morrisons. Their new wealth does not mean they are giving up their day jobs as both are staying to run the company for Morrisons, seduced by a lucrative five-year shares deal.