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Tesco puts hopes in online shopping for UK turnaround

Anh Nguyen | April 21, 2014
Tesco hopes to grow its UK business through online shopping, rather than bricks and mortar, as it announced a 3.6 percent fall in trading profit to £2.2 billion.

Tesco hopes to grow its UK business through online shopping, rather than bricks and mortar, as it announced a 3.6 percent fall in trading profit to £2.2 billion.

Overall group trading profits also fell, six percent, to £3.3 billion, according to the supermarket giant's preliminary results for the year to 22 February 2014.

In a video to investors, Tesco CEO Philip Clarke said that the UK business was going to "take some time" to start growing again after the company's larger stores suffered from the move to online shopping.

"We are not opening a lot of new space these days and you can see these long run impacts of this tightening recession. And the growth of online. Online retailing growing for everybody in the UK," he said.

To support the growth of online shopping, Tesco said it would be investing further in automation. This comes the same week that department store chain Debenhams announced similar automation investment to support its omni-channel changes.

"We continue to build capability through the automation of 'goods to person' at our new Erith facility," Tesco said. "This enables us to pick products almost three times faster than in our stores — an improvement on our Crawley and Enfield dotcom-only stores."

Meanwhile, the supermarket said it was strengthening its brand through the help of social media.

For instance, at the end of November, it launched a social network called 'The Orchard', which invites customers and colleagues to share their opinions and ideas on Tesco products and services. The network so far has 60,000 users.

Digital initiatives

Tesco also revealed in its results that it plans to launch a new digital device this year, following on from the success of its Hudl tablet, of which it has sold over 500,000 since it launched in September 2013.

One of the main aims of Hudl was to provide users of the device a user-friendly and easy access to Tesco's digital services, with prominent apps on the device providing direct access to services such as Tesco's online grocery shopping, its loyalty programme Clubcard and its movie streaming and e-book service Blinkbox.

According to Tesco, its digital services and products appears to have paid off.

"Customers who choose to use our digital services or products spend 13 percent more," Tesco said in its results presentation.

Another digital device — Tesco did not specify what form this would take — would therefore presumably be an additional channel for driving these digital transactions.

In addition, Tesco plans to launch an e-wallet, which CEO Clarke said "will be transformational, leaning straight into the connected consumer who is now shopping instore, on mobile or online".

 

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