Tesco sees all growth in food coming from online – is building “dark stores” in London to keep up
Following on from my post about Deloitte’s “Digital Disruption – Short Fuse, Big Bang?” report, I read in the Guardian that UK retail leader Tesco is planning to cut back on new store openings in favour of internet-only capacity as shoppers turn their backs on the weekly shop.
From the Guardian report, Tesco is to build a national network of online-only stores as it looks to cash in on the surge in popularity of internet grocery shopping.
Shoppers are increasingly turning their backs on the weekly schlepp to the supermarket so Tesco is cutting back on store openings to focus on its internet arm where sales are expected to double to more than £5bn over the next five years. Nicknamed “dark stores” in the industry they are not open to the public but are used to assist nearby shops where staff cannot keep up with orders placed by web customers in their catchment.
Tesco already has four dark stores in London but internet boss Ken Towle said on Monday that another two would open in Crawley and Erith, near Dartford, and it was scouting other cities, including Birmingham and Manchester, for locations.
“Food online is growing really well for us,” said Towle adding it would need “tens” rather than “hundreds” of dark stores as it will also continue to pick orders from normal supermarkets. “To meet demand we do need to put down extra capacity.”
Tesco’s decision to pump investment into its grocery home delivery service is more bad news for internet rival Ocado which last week reported a slowdown in sales as the jubilee and Olympics disrupted trade. The online grocery sales are expected to almost double in value by 2016 to reach £11.2bn, according to analysts at IGD.
Speaking at a conference last week the Tesco chief executive, Philip Clarke, said Tesco.com “provides all the growth we have in our core food businesses these days”.
So what does this mean?
This confirms for me that the digital bang in retail (and specifically supermarkets and the convenience sector) is already happening
UK company Ocado has been leading the way with online grocery shopping for some time, and the fact that the largest UK retailer is now seeing all core food growth coming from online, the digital bang in retail has started!
Ocado need to focus on their customer service (have experienced both ends of this first hand) if they are to grow their business.
In the age of online shopping with multiple alternatives, the winners in this space will continue to innovate and lead in customer service.
You can read the Deloitte report at http://lc.tl/sfdb