Tesco.com is no e-basket case

UK grocery chain bucks the trend by revealing that its e-commerce operations will be profitable earlier than expected
Written by Graeme Wearden, Contributor

UK retailer Tesco has reinforced its position as one of the UK's e-commerce success stories after forecasting that its Web operations will reach profitability by the end of this year.

In the period between 24 February and 11 August, Tesco.com achieved sales of £146m -- a 77 percent rise on the same period in 2000. The site made a total loss of around £3m, which the company partly attributed to the cost of setting up new services such as a wine warehouse.

"Tesco.com will be profitable this year," said chief executive Terry Leahy. "Grocery homeshopping is already in profit and we recently announced that we are taking grocery homeshopping to the USA," he added. The company had previously predicted that it would reach break-even point in 2002.

Tesco's deal with US grocery retailer chain Safeway will give it access to millions of potential American customers. "There is 60 percent Internet penetration in the US as opposed to 35 percent in the UK. We will be accessing potentially 150 million people through 1,500 Safeway shops," said Leahy.

The e-commerce grocery sector has recently gone sour in the US. Dot-coms such as Webvan were once tipped to revolutionise shopping in America, but the company was forced to file for bankruptcy back in July.

Unlike Webvan -- which spent heavily to construct its own warehouses -- Tesco.com fulfils online orders at local stores. Some analysts believe this model could help it to succeed in America, if its deal with Safeway helps it to offer a reliable and cost-effective service.

Tesco also announced that 35 percent of applications for its new Personal Finance products are now being made via the Internet.

The company made total profits of £481m, a rise of 14 percent, on turnover of £11.5bn. It is planning to create 20,000 jobs worldwide this year.

See the E-commerce News Section for the latest headlines.

Have your say instantly, and see what others have said. Click on the TalkBack button and go to the ZDNet news forum.

Let the editors know what you think in the Mailroom. And read other letters.

Editorial standards