Bloomberg News

Tesco to Complete International Online Jigsaw Early Next Year

March 25, 2013

Tesco Plc (TSCO), the U.K.’s largest grocer, will complete the introduction of Internet shopping to all its international markets when it starts up in Turkey early next year, according to the executive overseeing the plan.

The start of online operations in Thailand next week and in China in June or July, will leave Turkey as the last of Tesco’s 12 international markets without an e-commerce function, director Frans Falize said at a briefing in Bangkok today. The Turkish online offering should begin in January 2014, he said.

Chief Executive Officer Philip Clarke said last week Tesco will spend $750 million this year to develop online shopping and other digital services, as customers worldwide shift to purchasing via computers, mobile phones and tablets. The company now offers online grocery shopping in the U.K., Ireland, Korea, Czech Republic, Poland, Slovakia, Hungary and Malaysia. At home, Tesco has capacity to deliver to 99 percent of homes.

A common technology and operations model based on its U.K. Web business “allows us to launch in any market within three to six months, depending on planning restrictions,” Falize said. The grocer typically starts in the capital city using local stores as hubs and replicates the model across the country.

In the U.K., where Tesco introduced online shopping in 1997, the Internet grocery market is growing about 15 percent per annum. Web sales contributed 2.8 billion pounds ($4.3 billion) to the Cheshunt, England-based retailer’s 72 billion pounds of revenue last year. Tesco has said its online operations are profitable, without providing figures.

U.K. Blueprint

While the U.K. model serves as the blueprint for the international rollout, some local conditions and preferences have to be taken into account, according to Tesco.

The 30 vans for the Bangkok operation are smaller than those in the U.K. so they can better cope with traffic congestion. Still, they have bigger refrigeration units to protect fresh and frozen foods from the sweltering heat.

Customers outside of the U.K. have the option to pay the delivery driver by card when their food is delivered, because in some markets there is distrust of online payments, Falize said.

In Thailand and China, where cash is still more widely used than payment cards, Tesco may have to consider accepting coins and notes when it delivers online orders, he said.

Tesco’s online business in Thailand starts in Bangkok on April 4. The country is the retailer’s second-largest international market, accounting for revenue of 3.2 billion pounds last year. The Tesco Lotus chain has more than 1,400 stores in Thailand, which has a population of about 70 million, and a leading market share of about 14.5 percent.

Tesco runs hypermarkets, convenience stores and about 140 shopping malls in Thailand. Last year, it opened 350 convenience stores, which Tesco Thailand Chief Executive Officer John Christie said he is seeking to match this year.

To contact the reporter on this story: Gabi Thesing in Bangkok on gthesing@bloomberg.net

To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net


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