Tesco this week set out how it is continuing to develop its multichannel services in a UK online grocery market that is now settling at a new lower level post-pandemic.
The grocer, ranked Elite in RXUK Top500 research, says its 35.9% share of that market shows its resilience “even as overall online volumes continue to normalise”. In the first half of its year, online sales fell by 11.3% to £2.7bn on a like-for-like (LFL) basis that strips out the effect of store – and business – openings and closures as shoppers return to both its larger (sales +1.4%) and convenience (+6.5%) stores. In all, 12.9% of Tesco sales took place online – 3.6 percentage points (pp) higher than before the pandemic – and, says Tesco, it has kept nearly 70% of its customers who bought online during that pandemic peak.
Tesco is continuing to focus on offering convenience through multichannel and delivery options. Its Tesco Whoosh one-hour delivery service is now available from 400 sites, with a plan to get to 800 by the end of this financial year. The service now offers a choice of more than 2,600 products, and customers buy an average £25 basket when they use it.
Click and collect has been added to more than 200 sites since the pandemic started – taking it a total of 530 by the end of the first half. The service is now a kerbside option at 180 locations and available to more than 70% of UK households within 25 minutes. Some 71% of its large stores offer the service.
The update came as Tesco this week reported group sales of £32.5bn in the six months to August 27 2022. That’s 6.7% ahead of the same time last year. When VAT and fuel were excluded, sales grew by 3.1% to £28.2bn. Food sales were 1.6% up on last time, despite a 11.3% decline in online sales to £2.7bn. That’s still 53.4% ahead of pre-pandemic 2019. Now 1.13m orders are placed, on average, each week – 10.5% down on last year but 51.8% ahead of 2019. It has 666,000 subscribers to its delivery saver – 0.4% down on last year but 35.4% ahead of 2019.
Pre-tax profits of £413m were 63.9% down on the £1.1bn it reported a year earlier, after ne-off costs of £626m driven by higher rates of discounting. Tesco says it has a “relentless focus on value” in an offer that includes matching Aldi prices, “low everyday prices” locked in until 2023, and Clubcard prices and personalised rewards for 2m members of its loyalty scheme.
Tesco chief executive Ken Murphy says: “We know our customers are facing a tough time and watching every penny to make ends meet. That’s why we’re working relentlessly to keep the cost of the weekly shop as affordable as possible, with our powerful combination of Aldi Price Match, Low Everyday Prices and Clubcard Prices, together covering more than 8,000 products, week in, week out. We’re also investing significantly in our colleagues, with a further boost to pay announced today for our UK stores.”
He adds: “As we look to the second half, cost inflation remains significant, and it is too early to predict how customers will adapt to ongoing changes in the market. Despite these uncertainties, our priorities are clear. We have the right long-term strategy and we will continue to balance the needs of all of our stakeholders. Most importantly, we will stay focused on delivering value for our customers and supporting them in every way we can.”
Tesco has brought forward by five years, to 2025, its target of halving food waste in its operations. It has rolled out electric online delivery vans and, within its distribution operations, HGVs. It has set up renewable energy projects and has eight solar-powered refrigerated trailers. Electric charging points are now available at 500 shops.