The head of Morrisons today unveiled plans to drag the struggling supermarket into the 21st century as he admitted it was losing £500 million a year in sales to online rivals and still using pen-and-paper methods to check stock.

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 and are now seeing double-digit online growth.

Chief executive Dalton 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 retailer is also pushing ahead with expansion plans which include a greater presence in London where it currently has only a 6.5% 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.

It was a 21st century business run on "infrastructure firmly stuck in the 20th century" with the antiquated systems making it difficult to plan promotions such as multi-buy offers.

Mr Philips said Morrisons was the only retailer of its size in the world still using pen and paper for stock checking, which will not be completely phased out until January next year when all stores will be using tablet computers.

"It is the most advanced rebuilding of retail systems anywhere in the world - from having the worst systems to the best, leapfrogging a generation," he said.

Mr Philips said Morrisons had also been losing out as otherwise loyal customers, who at times could not get to stores, were spending £500 million online elsewhere.

"We are a value retailer without a dotcom offering," he said. "So many people can't afford to take the bus down to a store and take the taxi home."

He 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.

Morrisons announced a 25-year deal in May under which it will pay £170 million to acquire Ocado's distribution centre in Warwickshire for deliveries and is also paying to use the company's technology.

The supermarket, which employs 132,000 staff at more than 400 stores, reported a 7% drop in full-year profits to £879 million earlier this year, based on sales of £18.1 billion.