Tesco

Tesco Case Study Context

Tesco, well known as Britain's leading food retail group with a presence also elsewhere in Europe, Asia and the United States has also been a pioneer online.

As this Tesco.com case study shows, retailer Tesco is generally recognized as the worlds largest online grocer and it has an annual turnover of Ј1 billion online in the UK and has launched in other countries, internationally and is diversifying into non-food categories.

Tesco.com 2006/2007 online sales

By September 2007 online sales in the first half of the year were Ј748 million, a 35% year-on-year increase, and profit increased by 62% to Ј54.7 million. Tesco.com now receives over 300,000 orders each week.

More details on online sales and non-food sales details are also provided in the main 2006/2007 annual report

On p23 it reports:

Today the tesco.com model operates in the UK, the Republic of Ireland and South Korea.

Online grocery sales have exceeded Ј1 billion for the first time in the UK alone. We have an active customer base of 850,000 and more than 250,000 orders are now being completed each week.

In the UK, nearly 1,860 vans operate out of 294 stores. In our Newcastle store our service is so popular that there are now 18 vans delivering to local customers. Drivers deliver between 9am and 11pm, and our staff start picking our customers' orders from 6am.

A record-breaking 1.3 million shoppers chose tesco.com to deliver their presents and groceries over Christmas, and to make sure that these were all picked successfully, our staff started picking even earlier, at 4am.

Tesco.com have around 9,000 pickers, the majority in existing stores, but one specific delivery store has been opened in Croydon.

Tesco.com 2005 online sales update

Sales at Tesco.com, the UK market leader in home shopping, rose by 32% year-on-year, but they still only represent over 3% of its UK sales of Ј32.7bn! Tesco said it had 750,000 regular customers and 200,000 orders a week online giving a total turnover approaching Ј1 billion

Update - Tesco Direct launched

Read Tesco Direct launched

In 2006, Tesco launched Tesco Direct to rival catalogue retailers such as Argos.

Over 8,000 products will be available from beds and sofas through to kitchenware, electricals, cameras, bikes and golf clubs - giving customers more products at great Tesco prices than they have ever had access to before. Customers can choose the product they want on a new website or from a new catalogue and then order in one of three ways:

On-line via the tesco.com website

By phone

In selected stores at the new Tesco Direct desks

In the press release for this update it was reported that Tesco.com now has Ñ* million regular grocery shoppers with over 200,000 orders per week and achieved over Ј1 billion in sales in 2005.

Tesco Product ranges

The Tesco.com site acts as a portal to most of Tesco's products, including various non-food ranges (for example, Books, DVDs and Electrical items under the 'Extra' banner), Tesco Personal Finance and the telecoms businesses, as well as services offered in partnership with specialist companies, such as dieting clubs, flights and holidays, music downloads, gas, electricity and DVD rentals. It does not currently sell clothing online but in May 2005 it introduced a clothing website (www.clothingattesco.com), initially at to showcase Tesco's clothing brands and link customers to their nearest store with this range.

Tesco Competitors

Tesco currently leads the UK's other leading grocery retailers in terms of market share. This pattern is repeated online.

The Nielsen/Netrating audience panel for September 2007 for the top UK supermarkets shows the lead of Tesco, offline market share is in brackets from TNS which monitors the household grocery purchasing habits of 25,000 demographically representative households in the U.K.:

Tesco.com (5.2. million unique users, September 2007, 30.9%)

Asda (1.4 uniques users, 16.9%)

Sainsburys (840,000, 16.4%)

Waitrose (332,000)

Morrisons (225,000).

Tesco.com UK competitor update for 2006

Some companies are repeated since both their main site and the online shopping site are reported on separately. Asda.com now seems to be performing in a consistent manner online to its offline presence. However, Sainsburys online performance seems to be significantly lower compared to its offline performance. Some providers such as Ocado which originally just operated within the London area have a strong local performance.

Notably, some of Tesco.com competitors are absent from the Hitwise listing since their strategy has been to focus on retail formats. These are Morrisons (12.5% retail share, Somerfield (5.5%) and Co-op (5.0%).

Promotion of Tesco services

As with other online retailers, Tesco.com relies on in-store advertising and marketing to the supermarket's Clubcard loyalty scheme's customer base to persuade customers to shop online. NMA (2005) quotes Nigel Dodd, marketing director at Tesco.com as saying: 'These are invaluable sources as we have such a strong customer base'. However, for non-food goods the supermarket does advertise online using keyword targeted ads.

For existing customers, email marketing and direct mail marketing to provide special offers and promotions to customers is important.

According to Humby (2003), e-retailer Tesco.com use what he describes as a 'commitment-based segmentation' or 'loyalty ladder' which is based on recency of purchase, frequency of purchase and value which is used to identify 6 lifecycle categories which are then further divided to target communications:

"Logged-on"