May 20 2008

Editorial - Grocery watch

A quick look at the trials and tribulations at Tesco and Sainburys show that while they’re both doing incredibly well they’re not great at everything

The big supermarkets have been in the news over the last few weeks and it’s probably worth looking a little more in-depth at the supermarket sector, especially as they seem to be a mass of contradictions, some are getting even deeper into online while others are getting out.

Sainsbury's last week reported that their online sales grew 43% year on year and they now deliver to 90,000 customers per week, up 40% on the previous year, but still a minor fraction (0.5%) of the 16.5 million who shop offline every week. The service operated from 147 stores at the end of the 2008 financial year but had reached 151 stores by the end of April 2008. In addition they’re expanding the number of delivery slots and they’re planning to launch a non-food online service in the first half of the next financial year (I make that early to mid-2009) and in preparation their doubling the online team as well as building a separate supply chain as well as retail and central trading support, setting them back around £15 million in 2008-9 and 2009-10. Although that has to be contrasted to the £850 million they spent last year in new store development, extensions, refurbishment, IT and supply chain etc or the £669 million they spent the year before, so it’s not exactly big money.

While the figures for online are spectacular - you can’t argue with 43% growth and 90,000 customers – the move to non-food over such a long time-frame seems madness, plus the way they handle non-food products currently just doesn’t bode well for 2009.

Sainsbury already has a non-food online service, the snappily titled Sainburys Kitchen Appliances (www.sainsburyskitchenappliances.co.uk) has been around for some years, but after it’s initial instore push, where you couldn’t escape seeing the catalogue or the web address it seems to have been side-lined and forgotten. Plus the current instore non-food items just don’t seem to make it to online, so all those enticing 50inch flat screen TVs etc that fill the local store just can’t be bought online – we don’t all drive Chelsea tractors!! – which certainly frustrates the hell out of me.

While Sainsburys are investing and adding new areas to their online offerings Tesco are riding high but are cutting out some of the dead wood and adding new features. According to the interim results Tesco.com sales are up by 31% to £1.6bn, with over one million regular customers and a 20% growth in new customers. They’re just added music download site Tesco Digital which launched with 3.3 million music tracks to download, with TV and film to follow that replaced the old WMA drm-restricted music download site. Elsewhere there shutting down strands of the site that just aren’t working. Tesco flowers online is now no more, the website gives this reason.

“We have been reviewing our online flowers service very closely over the last few months. Our customers deserve the highest level of service and when we aren't able to deliver this, we have to think again. Reluctantly, we have decided to close our online flowers service at Tesco.com from 7th May 2008.”

Which sounds ominous. Another division that seems to have closed – but this time for a rethink rather than for good – is the online clothing part of Tesco Direct. The website gives this reason for the closure.

“Thank You for visiting Tesco clothing online. We have listened to your feedback and will be trying to improve our offer based on this. Check back here for more news soon.”

And finally they’re selling the property site Tesco Property Market to agents Spicehaart who will manage the site for Tesco. The Property market site was launched in September 2007 and aimed to provide a one-stop online property shop.

Interestingly in a chat with Martin Stern at Keynote we turned up some interesting information about the current state of the supermarkets particularly the ease of use of their sites, and we’ll share that with you later on in the week.

by Marcus Austin (Web Editor)