Struggling supermarket chain Somerfield is pulling out of its online shopping business, with the loss of 226 jobs. Reasons cited include lack of growth the significant distraction to management at a time when its focus has to be on the core Somerfield and Kwik Save business.
Another look at e-commerce food retailing at some stage in the future has not been ruled out providing the decision would have no impact on Somerfield’s main home delivery service which is set to expand.
Somerfield, which last month announced a 9.8% fall in fourth quarter sales, is understood to be losing up to £1m a month from the 24-7 home shopping division. It has been said that most of the country’s larger food retailers offered home shopping services, but few were yet seeing any profits from them.
The business will stop taking orders from Monday 19 June and will cease trading on 25 June.
The fleet of delivery vans will be used to expand the group’s home delivery service, which will be extended into more stores. Shares in the company rose slightly on the news which is expected to prompt a rethink among smaller retailers, who have been rushing to join the e-commerce revolution.
Somerfield is currently pre-occupied with another struggling division, Kwik Save, after it shelved plans to put it up for sale.
In March Somerfield, Britain’s fifth largest supermarket chain, gained a new CEO, John von Spreckelsen, following the poor performance of the group in the wake of the Kwik Save takeover. Many analysts thought the £1.25bn price tag for Kwik Save was too high and the poor performance at many outlets has dragged down the parent company.
Last month the company announced that its sales were down almost 10% in the first three months of this year. The sales slump was most severe at Kwik Save stores where sales dropped 16%, while Somerfield was down 5.1%.