The search for positive signs in the online grocery world has usually required a keen eye. Now it only requires a glance across the Atlantic to the UK.
That’s where online grocer Tesco.com is poised to turn a profit for the entire year, lending credence to one form of the Internet grocer business model and poking giant holes in other parts of the grand scheme.
In fact, Tesco.com has much to teach the entire U.S. e-commerce community about how to reach the promised land of profitability.
Tecsco.com is the Internet division of grocery chain Tesco. So, in other words, Tesco has a brick-and-mortar presence. That’s important, as we all know by now.
But Tesco also made an early and conscious decision to adopt a specific way of getting the groceries that it delivers across almost all of England. It doesn’t take them from warehouses. It gets them from store shelves.
This, it seems, should be good news for Peapod (Nasdaq: PPOD), the online grocer that has been bleeding money and receiving regular transfusions from Royal Ahold.
Empty Warehouse
On the other hand, Webvan (Nasdaq: WBVN) can only read doom-and-gloom into that aspect of Tesco’s success. Tesco, in fact, said it looked at the warehouse option and determined it was not possible to generate enough customers to justify the capital investment or the upkeep.
But Tesco’s success story goes way beyond the grocery niche to be a virtual blueprint for how to use the Internet to make money.
Tesco expanded internationally, but not in a world-domination, no-holds-barred, conquer-the-planet kind of way. It targeted places like South Korea, where Internet use is high and where high-speed Web connections abound, enabling the grocer’s jam-packed pages to download quickly.
Load Before the Cart
And it has left no stone unturned at home either, setting up a site for blind shoppers and forging a deal that will enable it to segue into digital television when its adoption becomes more widespread.
But much of what Tesco has done is far simpler. Yes, its site is designed so the pages load quickly. A big deal? Not really, unless of course you happen to have a slow connection and abandon your shopping cart halfway through an order — as millions of online shoppers have done.
Across the Pond?
Now, not everything is as simple as cutting and pasting what Tesco has done to create U.S. online success. The markets are different. Tesco is a massive brick-and-mortar grocer that was able to absorb losses while it ramped up.
But its rarity is a sign that we should examine all of the e-commerce success stories we can find, and where possible, boil their essence down to a level we can understand.
With Tesco, success came as a result of its sound business practices and, maybe more importantly, its respect for the customer. Respect is a simple thing.
Talk about Respect
Unfortunately, respect is also an ideal that many an e-tailer has talked about without following through.
Tesco shows what can happen when that talk becomes action. Its profits are proof that doing things right pays off in the end.
What do you think? Let’s talk about it. 
Note: The opinions expressed by our columnists are their own and do not necessarily reflect the views of the E-Commerce Times or its management.
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I’m surprised by this article – Tesco could considerably improve its site by reduction of page size and image sizes – their home page is 45K just for the main frame HTML, 30K for the top and left frames, and then the right hand side and main frame images are about 25K worth – thats 100 Kilobytes. What was that inaccuracy in the article about Tesco having small pages and being quick to download? The journalist who wrote this piece should be told to concentrate on checking the story before publishing and this would have revealed the hollowness of this particular claim. With page sizes like that, it must be frustrating for the vast majority of people who don’t have a high-speed Internet connection.
From a logistics standpoint, how does a store with limited aisle space realistically pick and pack from store shelves? Is it really conceivable to do this without inconveniencing the customers already standing in the aisles? How do you keep your pick/pack people doing their jobs when in-store customers hold them up with inquiries? Seems a little unrealistic on several levels, but it sure beats having Webvan leave your market.
The ‘.com pickers’ do have to compete with other shoppers and do get asked questions – but they have time; they are picking several hours before the order is due to leave the store – it no different to Disney’s litter collectors who were seen as key customer relations staff.
As the stores are so large, they don’t make a significant impact on traffic in the store. Especially since the delivery slots are spread evenly throughout the week. They also have hand scanners to automate and are clearly more knowledgeable than the average shopper about where the products reside. But I can’t help feel that it is easier for the pickers to decide they can’t find something rather than when a stock item is off the shelf ask someone to find it ‘outback’.
I agree. A disappointingly uninciteful article.
Its only interest for me was that I use the service and therefore able to ‘know’ more than the writer about how it works and as an IT professional something of the way the system works.
To your design point – They get round the bandwidth issues – not by design of the website, which is not that great, but by supplying a CD application and updating it by file transfer – that works well.
The user interface is not intuitive and took my wife and I months to get used to.
I’m a bit lost, so I’m using our offer to reply in order to find how I can find out how much a packet of either 160 or 240 Thypoo tea bags cost? I’m in France, Dijon and need this information to ask a friend to bring them over for me. The price does not need to be contractual, but I need to know a sum approx. Hope you can help. Or give the address where to contact to get the information.
Yours aye. MIKE
One thing that the article failed to mention was if Tesco charges a delivery charge for grocery deliveries (which I believe they do). Thus, the biggest thing that this company can teach its American counterparts is that if you are making 3% margin on a $100 order, you cannot absorb a $5 per stop delivery charge when offering free delivery (or even more ridiculous free delivery by appointment).
Tesco was in no rush…they didn’t have venture capitalists breathing down their back…their success, going after the edges, would be considered feeble in the U.S.