Tesco.com - A Rare Profitable Dotcom

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Case Details:

Case Code : ITSY025
Case Length : 14 Pages
Period : 1990-2003
Pub Date : 2003
Teaching Note : Not Available
Organization : Tesco plc
Industry : Retailing
Countries : UK

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Excerpts Contd...

Website Maintenance

Tesco employed several web design agencies to develop and maintain the grocery selling websites for its stores (customers logging onto Tesco websites from different areas were directed to the website of the store that delivered to their respective areas)...

A Unique Business Model - The Outcome

Justifying Tesco's faith in the online grocery business and its unique strategies, sales increased from $19.2 million in 1998 to $264 million in 1999.

Buoyed by this, the company increased the number of stores under the online model to 100 by September 1999.

The fact that the online operations had Tesco's backing, financial support and brand equity to leverage, seemed to be working to its advantage...

The Safeway Alliance

Besides the improving financials, perhaps the alliance with the US-based retailing chain Safeway (number three in the industry) was the biggest testimony to the corporate world's belief in Tesco.com's business model...

A Few Reasons to Worry?

In 2002, Tesco.com began offering its services in South Korea, where it already operated its retail store network.

The company's decision was prompted by the fact that Korea was one of the few countries that had a large number of households with broadband Internet connectivity.

For 2001-02, Tesco.com recorded sales of £356 million and a net profit of £400,000. The following year, while sales increased to £447 million, the net profit was £12.2 million...

Exhibits

Exhibit I: Tesco - After the Mid-1990s
Exhibit II: A Note on Tesco's Loyalty Card Scheme
Exhibit III: The Online Grocery Retailing Business - A Brief Note