Morrisons‘ announcement that it is planning to launch an online grocery offering this year dominated the headlines in the wake of the group’s full-year results. While the news is of strategic significance for the UK’s fourth-largest retailer, it should not overshadow ongoing problems the firm is having in its core business.

Morrisons announced yesterday (14 March) it plans to expand into one of the fastest growing segments of the UK retail sector: e-commerce.

The group said it is in talks with online retailer Ocado to “licence certain of Ocado’s intellectual property and operating knowledge” as it looks to launch an online grocery business in the UK.

Speaking at a press conference in London yesterday afternoon, Morrisons CEO Dalton Philips revealed that – after 24 months in development – the grocer now sees a route to building an online platform that will distinguish it from the rest of the pack.

“We have a very specific plan on what we are doing, how we are going to deliver it and what the proposition is,” Philips told journalists. “Around 24 months ago we said we couldn’t ignore the online food market but we needed to understand it a lot better. We have spent the last 24 months really investigating this market. We have been consistent in saying, if we do it, we want to do it in the right way. We have got a big, strong core and we feel very confident we can to this.”

Philips has repeatedly insisted that if Morrisons is to move online, it must do so on a profitable basis. Speaking yesterday, he again emphasised the business needs to turn a profit, but declined to provide a timetable to detail how quickly this could be achieved.

Morrisons is not just investing in developing its e-commerce capabilities. The group is also putting a significant wad of cash behind expanding its fledgling convenience operation. In recent months, Morrisons has cleaned up in the UK high street, snapping up choice locations as other retailers – Blockbuster, Jessops and HMV – have fallen into administration.

“We have either opened or acquired 70 stores just one month into our financial year so we are pleased that we will exceed our 2013 target,” said Morrisons’ MD of convenience, Gordon Mowat, said last month.

As the company had previously indicated it aims to open 70 stores in 2013, it seems clear the firm is well on-track to exceed this goal very comfortably indeed.

The news that Morrisons is stepping up its convenience and online activities has been a long time in coming. For years, successive management teams at the supermarket operator have been dogged by the question of when the firm will plunge into the depths of online retailing and expand its footprint of smaller stores. This has finally been answered and Morrisons has made it clear it is investing heavily for future growth.

The group aims to become a more modern retailer that is responsive to changing consumer shopping habits in the UK. It thinks it can do this while retaining its appeal to the value-conscious core Morrisons shopper. It also believes that success will be driven by the things that make Morrisons distinct: its focus on freshness, artisanal skills and a vertically integrated supply chain.

So far so good? Well, investors would certainly seem to think so, no doubt excited by the sales upside offered by these under-exploited revenue streams. Confirmation that the firm will move online caused some degree of excitement in the market, sending Morrisons share price up – even though the firm’s full-year numbers failed to meet expectations.

But therein lies the rub.

Morrisons sales are under-performing the UK grocery market. The grocer has been hit by sustained pressure on consumer spending, with like-for-likes down 2.1%. Total sales for fiscal 2012 were up 3% year-on-year, and the group said its “below market” sales performance was “disappointing”. Morrisons is losing share to its rivals.

Morrisons management has emphasised it is at a disadvantage to its competitors – all of whom have a much bigger online and convenience presence.

However, while these are the fastest-growing sectors of the UK retail scene – they are growing from a much smaller base. As Sainsbury‘s CEO Justin King recently suggested, online and convenience may be growing most quickly – but in value terms the biggest growth at this supermarket can be seen in its core stores. And a significant proportion of this is coming from Sainsbury’s general merchandise – and clothing in particular. These are areas in which Morrisons has done little more than dip its toe.

Morrisons has admitted its core stores are struggling and laid out its plan to improve consumer perceptions in the short term through improved marketing and promotions. The group intends to better communicate its message around freshness, craft skills and value and, at the beginning of this year, the firm announced that it has entered into a sponsorship deal with Britain’s Got Talent hosts Ant and Dec, who will appear in Morrisons TV advertising.

It is a little too early to say whether these initiatives have managed to turn the tide back in the favour of Morrisons’ core supermarkets.

However, alarmingly perhaps, there are those that doubt whether Morrisons has got its base message right. Indeed, some in the industry have argued that ranging initiatives and the fresh focus have caused the group to lose touch with its core consumer.

Meanwhile, Conlumino analyst Joseph Robinson suggests the group’s marketing strategy is being outflanked on both premium and value messages.

“Morrisons has struggled to communicate its competitive strengths effectively enough. At the value end, its investment in campaigns such as ‘Payday Bonus’ has been drowned out amid a sea of marketing and promotional activity among its main competitors. At the more premium end of the market, Morrisons does have a strong story to sell to the more affluent consumer, particularly for quality and freshness; however it is simply not communicating these strengths effectively enough,” Robinson concludes.

Morrisons management, nevertheless, would likely rebuff both assertions.

To Morrisons, it seems the value message and the quality message go hand-in-hand. Morrisons is striving to offer freshness and quality while remaining a value-oriented retailer. These principles are, after all, at the heart of its ethos – and have been since its market street beginnings. While the grocer concedes its value and quality messages have not been strong enough, it is worth highlighting that – to Morrisons – they are one and the same message. The question is, does this ring true with contemporary UK consumers?

While Morrisons has made significant headway of expanding its multi-format approach, in a commendably short space of time, the jury is still out on whether it is on-track to improve the performance of its core bricks-and-mortar portfolio. In the near-term at least, it is worth remembering this is where the vast majority of sales and profits will continue to be made – or lost.