UK retail market leader Tesco is hoping to collaborate with competing supermarket groups to cut costs by making collective purchases through Internet auctions.

The idea is that the retailers who take part in a purchase see costs fall as they benefit from economies of scale. It is hoped the scheme will be operational by the end of 2002.

Tesco was a founding member of Worldwide Retail Exchange, the not-for-profit exchange established in 2000. The group uses the exchange to buy high-volume generic products such as bleach, which it repackages and resells as its own-brand product. The group said that savings generated by transactions it has concluded using the exchange have already more than paid back the US$8m seed capital it contributed.

The group is now hoping to make joint purchases of commodity items such as fuel or tyres for its fleet, or even bricks for its new stores. The group is also said to be looking at using Web auctions to purchase ingredients.