Tesco.com, the online grocery arm of the leading UK supermarket multiple, is on the point of turning a profit after five years’ trading. The operations is expected to go into the black this year with sales of about £300m (US$440m), contrasting with losses of £9.6m a year ago.
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Five years post-launch, Tesco boasts one million registered users and processes in excess of 70,000 orders every week. More than half of those who register for the service go on to use it – a reasonable conversion rate for online services. Average weekly turnover from the operation is £6m, compared with £1m from one of the larger Tesco stores.
The news that Tesco.com is close to profitability is being interpreted as vindication of its decision to pick and dispatch orders from customers’ local stores rather than using warehouses. To minimise disruption in stores, pickers work in two strict time frames (6am to 10am and midday to 4pm, when stores are generally least busy).
Customers pay a £5 delivery charge, which has met with little customer resistance given that the average order value is £85, says chief executive John Browett.
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By GlobalDataTesco.com currently accounts for 2% of Tesco group turnover, although Browett believes it has potential to generate 10-20% of turnover within the next ten years.
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