Tesco plans to launch its online grocery delivery service in South Korea. South Korea has one of the highest penetrations of broadband Internet access, influencing the choice of location for Tesco’s latest move. But despite the South Koreans’ predisposition towards technology, Tesco may not do quite as well as in the UK. It will have to invest heavily in establishing its brand to attract a sufficient number of customers.
The move follows the recent announcement of a joint venture in the US. The online collaboration between Tesco and Safeway will be trialed in the San Francisco area, another region known for its high-tech preferences.
South Korea has the world’s highest penetration of high-speed Internet services – around 20% of households have broadband access. Other countries are being left behind in the technology stakes. Tesco deliberately ignored the potential of many European markets as a result of their poor Internet development, although admittedly the UK is one of the worst.
Tesco.com is widely hailed as a great British success story. With 750,000 registered customers, 70,000 regular shoppers and GBP300 million in annual sales, the venture is a far cry from the sorry tales of other online grocers. Since Webvan filed for bankruptcy last month, people have keeping a wary eye on any Internet supermarket offering. However, Tesco.com’s business model, based on fulfillment from existing supermarkets rather than costly warehouses, appears to work. Its latest developments, a website designed for parents and an online wine warehouse, have well-defined target markets allowing the company to wriggle into niche markets that complement its general offering.
The South Korean move may be a little risky, however. Tesco does not have the brand presence in South Korea that it does in the UK, and that is an important driver in gaining Internet sales. But if the company is planning to stick to its supermarket-hub strategy it will be able to keep the costs relatively low.
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