Tesco reveals online grocery profits as it builds multichannel offer

Tesco’s 17-year-old online grocery business makes the profit on £2.5bn of sales a year. Many in the grocery industry, including Ocado boss Tim Steiner, have called for the major grocers to split out the sales and profits of the online food arms amid questions over their profitability.

Tesco said it will focus on making individual customers profitable in all channels rather than focusing on any single channel’s profitability, multichannel boss Robin Terrell said.

The retailer is to step up activity in broadening its multichannel offer with the introduction of a free click-and-collect service for food and non-food and dropping the price of grocery home delivery later this year. It also plans to introduce a digital wallet, digital Clubcard vouchers, electronic receipts and roll out scan and shop technology.

Terrell said: “I’m confident we are well on our way to achieve our goal of multichannel leadership. It’s a massively compelling differentiator for customers and will help build our position.”

In a presentation to investors this afternoon, Tesco outlined plans to invest £200m to create “everyday low prices on the lines that matter most” rather than focus on promotions, which it will still run.

Group chief executive Philip Clarke said: “Prices must get better, must be more stable and frivolous promotions must end.”

The move came on the same day as Asda revealed it is to invest a further £100m in price on top of £200m planned for 2014. The price plan also comes after the discounters launched a savage attack on Tesco’s market share in 2013.

Clarke said: “Many of our competitors have done a good job. I would pick out Lidl, Aldi and Waitrose in particular. They have exploited their niches well and we do not ignore them.”  

Clarke said the key priority for 2014 is the refurbishment of its big box stores. It intends to refurbish all 360 of its largest stores by the end of 2017 and will refurbish all 1,700 of its Tesco Express shops by 2016.

The retailer will focus the £2.5bn of capex planned for each of the next three years on refurbishments and multichannel rather than new store space.

Tesco also revealed a raft of other plans including a second version of its Hudl tablet, which will launch this year, the introduction of a raft of international ecommerce sites for its F&F clothing brand and the launch of a Blinkbox Books service.

It also plans to introduce click-and-collect options for third party sellers through its marketplace offer which carries 500,000 non-food lines.