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Tesco's online proposition thrives post-pandemic with more digital innovation to come

Stuart Lauchlan Profile picture for user slauchlan October 6, 2023
Summary:
Tesco's omni-channel mix continues to deliver results.

tesco

While online sales at most grocery chains around the world have inevitably slowed down from their COVID crisis highs, the genie is out of the bottle when it comes to consumers looking to use digital channels.

The UK’s Tesco is a useful case in point, where online sales now make up 13% of the overall total, with a growth rate of ten percent year-on-year  That’s higher than pre-pandemic rates and leads Group Chief Executive Ken Murphy to state: 

Our online proposition has continued to strengthen post the pandemic and while orders are stabilizing at around 1.1 million per week, our market share remains very strong at around 36%...This has been driven by further improvements in our already market-leading service, with online availability now running at over 97% and the number of perfect orders up by 12 percentage points year-on-year, all of which has helped lead to gains from our online competitors.

One of the biggest assets Tesco has at its disposal is its long-established loyalty program, he says: 

Over the last few years, we've been working hard to build out a unique and powerful digital platform, powered by the scale and reach of Clubcard. We have driven up Clubcard penetration in every part of the group and increased the number of customers using an app to interact with us from less than 2 million to now over 16 million. 

There are some other impressive stats to suggest how successful this strategy is. For the first half of this year, digital engagement increased, with 7.5 million customers using their digital Clubcard at the till, and a 20% increase in the number of customers engaging with Clubcard via the web app or phone wallet. 

App

The app’s functional capabilities have also expanded. Customers can now use it to create shopping lists, check stock levels in store, and also book deliveries. This creates more reasons to engage with the app, which assists Tesco in other ways. Murphy explains: 

Strategically, more customers interacting with Tesco more frequently for more shopping missions creates stronger relationships, drives loyalty, and creates further opportunity for growth. Personalizing our offering is increasingly important to our proposition. We can use Clubcard, powered by dunnhumby, to understand our customers better than anyone in order to support them in their shopping journey whether in store or online. 

To that end, the first half of the year has seen 86 million personalized coupons issued to nearly 6 million customers. These consumers have delivered a four times greater return on these compared to their non-personalized equivalents.

Little wonder then that personalization is a big priority for the retailer. Murphy says: 

Personalization and digitization is not only about the app, but also in store and online. We have increased the number of digital screens in our stores, adding over 750 in the [first] half and delivering nearly 120 different campaigns. We now have more than 300 suppliers using our online sponsored search functionality, with 77 million daily impressions on our website, all made possible through dunnhumby's data science capabilities.

Whoosh

Delivery and fulfilment of orders is another priority. This year has seen the opening of a further three urban fulfilment centers, which Murphy says will allow the firm to handle an additional one million orders per year. 

Tesco has also rolled out its Whoosh rapid delivery proposition - within an hour - to 400 additional stores this year, bringing the total number of outlets offering this facility to 1,414, which Murphy says equates to being able to reach around 60% of the UK population: 

Whoosh has been a great addition to our offering and has been made possible by leveraging our extensive Tesco Express network requiring very little capital investment. We were really pleased to see Whoosh recognized as E-commerce Initiative of the Year at the recent Grocer Gold Awards, a testament to the operational efficiency, reach and innovation behind the proposition.

And then, of course, there’s the other side of the omni-channel mix - the stores network. Murphy concludes: 

Digital plays, I think, an increasingly important role in our total proposition, but I would start by saying that really our success is predicated on doing the basics really well. So, our very strong pricing position, very strong investment in product innovation and product quality, and then the shopping trip improvements over the last six months have been really notable. And we've seen progressive improvements in our shelf-based availability in both in store, but particularly online. That really has shone through such that we're gaining share both in physical stores, but also in our online proposition. So it is that combination.

My take

A continuing success story and one that may well be added to soon. According to a report in The Grocer, the retailer is set to launch an online marketplace that will “give customers the ability to shop ‘a broad range of third-party products”’alongside groceries on the supermarket’s website, with a particular focus on pet food, alcohol and healthy & beauty. 

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