Tesco.Com as an Online Distribution Channel

Tesco PLC is an international grocery and general merchandise retailer based in Cheshunt, United Kingdom. Tesco is the world's third biggest retailer after Wal-Mart and Carrefour (1), and the largest in the U.K. with a market share of over 30%, about twice the market share of its two closest competitors combined. Tesco was founded in 1919 as a brick and mortar business (2) and it would remain as such until 1996 when the company launched its online delivery service. However, it was not until 2000 that Tesco.com was formally established as the platform for online ordering. This case discusses and analyses how Tesco started online-grocery-retailing as a new distribution channel for its business, as well as the challenges, milestones, and rewards it encountered along the way.

In recent years the internet has served as a platform for online retailing for most products, take the case of online retailers such as Amazon.com or EBay who have successfully been able to sell a wide range of products over the internet. However, most companies have not been able to emulate this success in online grocery retailing. In fact, most early attempts resulted in failure as it is the case of Webvan.com and Peapod.com among others. Failure in this arena can be attributed to three main reasons. First, many customers want to actually sample the products to ensure their freshness, specially fruits, vegetables and meats. Second, high distribution costs due to large volumes and the fact that many products are perishable. And third, grocery retailing is a low margin/highly cost-competitive business.
Tesco PLC also struggled in the 1990s when it first tried to deliver groceries to customers’ homes via catalog and phone ordering “It was an operational mess and very inefficient” as CEO Laura Wade-Gery recalled. With the emergence of the internet, Tesco found the platform it needed to satisfy its customers by being able to deliver the groceries to their homes in a cost-efficient manner. Tesco