Morrisons boss Dalton Philips has admitted that its absence from the online food market is costing the Bradford-based retailer £500 million a year in lost sales as rivals enjoy double digit internet sales growth .

Mr Philips also revealed that Morrisons was the only retailer of its size in the world still using pen and paper methods to check stock and pledged to drag the business into the 21st century.

Britain's fourth-biggest grocer is poised to launch on the web later this year and is under pressure to catch up with the likes of Sainsbury’s and Tesco which began trading over the internet in the 1990s.

Mr Philips admitted that it had been years behind its rivals but insisted the business was now “fit for the future” after a £300 million infrastructure revamp and plans for the launch of its online operations following a deal to share technology with web retailer Ocado.

The Bradford-based superstore is also pushing ahead with expansion plans which include a greater presence in London where it currently has only a 6.5 per cent market share.

Its new M Local convenience stores are set to number 100 by the end of the year, rising to a possible 300 in three years’ time, many of them opening in sites previously occupied by failed high-street names such as HMV, Jessops and Blockbuster.

The expansion will see the first Morrisons store in London’s West End as well as locations including Kensington, Westminster and Windsor, far removed from its northern heartlands.

Mr Philips said: “By 2015, when all the work now under way is finished, we will be a true national, multi-channel and multi-format retailer. It means we can compete on a level playing field for the first time and succeed by building on the enormous strengths of our business.”

He said the partnership with Ocado would give the supermarket immediate access to online technology and deliver profits in four years – an outcome which rivals had taken a decade to achieve when developing their own technology.

Mr Philips admitted parts of the business had been two decades behind rivals when he took over three years ago, with cash still being counted manually in stores at the end of each working day.

Mr Philips said he was not interested in catching up with online rivals but wanted the supermarket’s offering to be better.

“I am confident it will set and continue to set new standards for online delivery,” he said.