Tesco is a leading global retail operation and is Britain’s leading food retail group. Tesco has a substantial European and international network of retailer operations and has recently begun selling non-food goods – e.g. clothing – in over 20 countries. In recent years Tesco’s online operation has enjoyed significant growth in online sales; its non-food operation, Tesco Direct, saw sales rise by 30 per cent. International sales are a fundamental part of Tesco’s growth strategy and in Korea, for example, sales grew by 15 per cent. Tesco states that its vision for online retailing takes account of customer needs (Tesco 2014 annual report): 

Well, our multichannel approach is already helping customers shop wherever, however and whenever they need to. In the future, the shopping experience will become even more seamless, convenient and effortless. Tesco Labs are already working on turning that vision into a reality for millions of our customers. 

Currently, Tesco Plc is one of the world’s top three retailers, competing with WalMart and Carrefour for the leading position. Tesco’s 2014 report described how international markets beyond the UK were grouped into three ‘cohorts’ depending on their current performance and potential: 

● South Korea, Malaysia and Thailand – markets with significant future potential; 

● Ireland, Czech Republic, Hungary, Poland and Slovakia – markets where we are focussed on holding our position and improving returns; 

● China, India and Turkey – markets where we know we must refocus on a more profitable approach to growth.

Founded in 1919 by Jack Cohen, the company grew rapidly and has a history of delivering innovations to the UK retail sector, so it is no surprise that once it became feasible to offer online shopping Tesco was quick to determine how it might trade online. By the early 1990s, Tesco was one of the few UK retailers that had invested in a specialist e-commerce department to spearhead its online developments. In 1994 Tesco started offering online shopping to its customers but strategically the organisation had big plans for online shopping. 

Tesco’s former chief executive, Terry Leahy, was quoted in the Sunday Times as saying: ‘We will be the world’s biggest online grocery retailer and we intend to become the UK’s No. 1 e-commerce business’. This goal was quickly achieved; by December 2000, Tesco offered a wide range of products to 90 per cent of the UK population. The online shopping service, Tesco. com, was established soon afterwards and operated as an independent subsidiary to Tesco. Tesco then started to diversify its online product range, offering many non-food products ranges, and the result was a significant increase in sales. To support logistical operations, Tesco developed a sophisticated semi-automated in-store picking service, supported by local refrigerated delivery vans using existing facilities rather than building high-tech dedicated warehouses and, according to Ellis-Chadwick et al. (2007), this created a strategic advantage that enabled faster geographical expansion of the online shopping services and a distinct advantage of extended national coverage of Tesco’s online shopping service provision. By 2003, 96 per cent of the UK population could shop online with Tesco.com, giving the company 65 per cent of the UK online grocery shopping market and further diversification of product ranges, e.g. financial services and telecoms. It started to expand and offered its online services internationally, for example, in South Korea through Homeplus.co.kr. 

Question 

Based on the case study and your own research, discuss where you think Tesco should focus to ensure it can continue to achieve success online and protect market share.