Tesco Direct closure the right move by Charles Wilson, GlobalData

Tesco has put its cards on the table by announcing the closure of its loss making non-food website, Tesco Direct, as it prepares to increase investment into one online platform, according to Thomas Brereton, Retail Analyst at GlobalData. Although it may seem the retailer (with revenues of £51 billion for the latest financial year) has the financial muscle to turn around any flailing venture, it must first turn its attention to long-term survival in the face of intense competition from an upcoming Sainsbury’s/Asda powerhouse, he adds.

“Tesco’s position as the UK’s leading grocer is under immediate threat from the CMA pending Sainsbury’s-Asda entity, with the 23.4% combined share casting Tesco in a distressing shadow in the Food & Grocery (F&G) sector,” says Brereton. “So the Tesco Direct news - which fell on the same day as the announcement of a waste reduction initiative – is clearly Tesco taking an active role in defending its core food business.”

He adds: “This certainly doesn’t forebode a substantial withdrawal from non-food markets. The retailer had already begun to quietly shift non-food ranges onto its Tesco.com site, including toys, homewares and cookware, and it seems likely to transfer more ranges across. However, this does provide Tesco an opportunity to “clear out the cobwebs” in certain product lines and will particularly be looking at reducing – or eliminating – third party selling.”

With the threat of the proposed Sainsbury’s and Asda merger, the rise of the discounters and growing speculation that Amazon might soon pounce on the UK grocery market, Tesco should rightfully be concerned about defending its market position, argues Brereton. But the “phenomenally bright” Charles Wilson is the right person to lead it against competitors and this online repositioning won’t be the last big move we see this year, he believes.

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