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Retail

Online Grocery Is 'Here To Stay', Says Tesco Chief Executive

Tesco chief executive Ken Murphy has said that he expects online grocery penetration to remain high, despite shoppers returning to stores after the pandemic, while the retailer also has solid expansion plans for its Tesco Whoosh rapid delivery concept.

Speaking to reporters following the announcement of Tesco's full-year results, Murphy said that he believed that online is "here to stay", despite a small reduction in penetration from the height of the pandemic.

"It spiked at about 15.5% at the height of the pandemic and it has settled down now to around 13% of sales, but if you remember, pre pandemic it was 9% of sales," he said.

"Although we've seen basket sizes come down a bit, it's quite a gentle reduction – it's sitting at between £92 (€111) and £94 (€113) average basket size – so we're really, really pleased with the resilience of our dotcom business."

Tesco Gains Online Share

Tesco accounts for more than a third (34.8%) of the UK online grocery market, it announced in its full-year results, a 142-basis-point increase on the previous year.

Orders have 'held steady' at around 1.2 million per week, while the retailer boasts around nine million digital Clubcard holders.

Murphy added that online behaviours are now "bedded in" with many Tesco customers, and given that they can avail of the same saver mechanisms through the online channel, "I think that some customers are going to be really really attached to the dotcom proposition".

Read More: Tesco Full-Year Results – What The Analysts Said

Rapid Delivery

On its rapid grocery delivery proposition, Whoosh, Tesco said that it plans to increase the number of stores offering the service to 600 by the end of the current financial year, up from around 200 currently.

"I think that's an indication that we think the mission is here to stay," said Murphy. "We want to make sure that we're there for customers when they need us, with a really good integrated offer."

Tesco has also been working on improving delivery times with Whoosh, with the majority of deliveries now "achieved in 30 minutes," said Murphy.

"So we're actually in and around where we think we need to be. We think that sweet spot is going to be around the half an hour mark."

Elsewhere, its Gorillas partnership, which currently operates from three stores, is also seeing 'high levels' of customer adoption, Murphy said.

"We're very curious about the model," he noted.

Checkout-Free Technology

Staying with technology, Tesco said that its trial checkout-free store in Holborn, London, in association with Trigo is working 'really well', and that the grocery is looking to tweak the technology in order to make it suitable for a potential further rollout.

"[Tesco] Holborn in particular is a very 'grab and go' shopping mission, with a really short patience window from the customer," Murphy said. "So the sign-up process is definitely something we need to work on to, to make it slick and easy.

"Once customers have signed up, they love it, but at the gate, when all they want is to grab something and go – if they haven't signed up, it's putting them off, so we've better work to do there. We're now working on a hybrid model that allow customers to do either grab and go, and completely frictionless, or checkout on exit."

As to whether shoppers have fully returned to pre-pandemic shopping habits, Murphy said that the current cost pressures facing households are likely to play a role in dictating their shopping habits.

"I think that we we definitely haven't swung right back," he said. "I think we're half way. And I think that with the kind of cost pressures that we're seeing on household income, people may choose to work from home more often. We want to make sure if they do so, that we look after them really well."

© 2022 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: The European Supermarket Magazine.

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