Not content with 30% of the UK retail market and a huge lead in the online grocery sector, Tesco has announced an aggressive drive into home shopping for non-food products.
In what is seen as a major challenge to Argos, the retailer is preparing to launch an internet and catalogue service that will offer customers a range of 8,000 goods.
The Tesco Direct service, which cost between £25m and £30m to set up, will go live on its website on September 6, while a catalogue with a much smaller number of products will be published two weeks later.
Andrew Higginson, Tesco finance and strategy director said: “More single person households, an ageing population, as well as more city-centre living are all factors affecting the changing face of retail in the UK. Over time we believe Tesco Direct will become a substantial on-line and catalogue-based non-food business.”
Tesco said customers would have the choice of having their purchases delivered or collecting them from selected Tesco Extra stores around the UK – although initially, there will only be 15 with the service available. For £7, it also plans to offer same day delivery for smaller items, and five to ten day delivery for large goods such as sofas.
The move forms another part of Tesco’s aggressive expansion into non-food products, through which it is taking on the likes of Boots and WH Smith. Its online operation Tesco.com made sales of over £1 billion last year.
In an advisory note, investment bank Citigroup said: “We could see £2 billion of UK sales over the medium term and Tesco Direct could also be exported to developed international markets like Korea and Ireland. We expect this to be another winner.“
The move has also been seen as a direct challenge to Argos, the former employer of Tesco Direct boss Steve Robinson. Argos says the fastest growing part of its business has been ‘check and reserve’ – through which customers can order products online or over the phone and pick them up at their local store.
A spokesperson for Argos told The Guardian: “It’s not a copycat operation, it’s a very small imitation. We are always mindful of competition and have great respect for Tesco, but we offer 17,000 products in our catalogue. Only a small proportion of Tesco’s products will be in its catalogue and we think it will be confusing for their customers.“