Marks & Spencer in secret talks with Ocado to launch online grocery service

The two businesses are reportedly in discussions over a deal that would see M&S buy key distribution centres, delivery vans and lorries from the online grocer.

According to The Mail on Sunday, talks between top executives at the two retailers have been held over the past few weeks.

A City source told the publication: “Archie Norman needs something transformational to make his mark at M&S and he is running out of time.

“The deal on the table is effectively buying the Waitrose part of the Ocado business and replacing it with M&S products.”

Ocado’s partnership with Waitrose is due to run until September 2020.

The upmarket grocer has developed its own separate delivery operation run from its own stores and warehouses. But at present, its customers can order Waitrose products either from Waitrose.com or Ocado.

John Lewis Partnership was one of the early investors in Ocado but sold its stake for around £150m in 2011. Over the past decade, the Partnership has invested heavily in establishing Waitrose.com, allowing it to directly compete with Ocado online.

The talks between M&S and Ocado come as chairman Archie Norman and chief executive Steve Rowe bid to transform the business into a digital-first operation. They eventually plan to sell a third of all products online.

Norman said last summer that fierce rivalry from other chains, growth in home deliveries and a slowdown in consumer spending were “eroding our business and market position”, adding: “The business is on a burning platform. Accelerated change is the only option.”

Any partnership between M&S and Ocado would be the latest in a string of deals penned by the online grocer and technology provider.

Ocado has already agreed to license its technology to Canadian operator Sobey’s, French supermarket chain Casino and US grocery giant Kroger. The latter has propelled Ocado’s market value to almost £7bn.

M&S and Ocado declined to comment.