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The on-line grocery threat

Most shopper transactions for local shops are under £10, which may be a good thing if the rise of on-line grocery shopping continues. But don't bet on it.

In a presentation last November, Laura Wade-Gery of Tesco.com, explained the advantages that has made it the UK's largest on-line retailer, with sales of £1.9billion and profits of £109m in 2008-09.

While only 3% of the grocery market is currently on-line, 6.7% of Tesco's grocery sales are through the internet. Using 309 stores nationwide, Tesco.com covers 99% of the UK, which means your home is within a 25 minute drive of their local distribution system. Tesco.com is now so successful it is having to build dotcom only stores to meet demand.

Shoppers come to Tesco.com because they know the brand but they stay if it is good at order fulfilment, quality and freshness and on-time delivery. Ms Wade-Gery promises that Tesco.com will continue to innovate, with ideas including: predictive ordering (where it remembers what you have ordered previously and fills in your shopping list for you), collect service, shop as you go from mobile phones, adding shopper reviews and discussions and making it equally worthwhile for smaller baskets!

The last item on the list is where local retailers need to sit up! At a recent dinner, John Lewis chairman Charlie Mayfield was asked which three competitors he feared. He named only two - Google, because it owned so many of his customers, and Amazon, because it could sell things so cheaply as it did not have to support an expensive retail real estate network.

Every local retailer is competing with Tesco because it wants all your shoppers for its customers. It is easy to visualise what you have to do to keep ahead of its physical shops, a short drive from where you live. But on-line, can you see what it is doing? Watch Tesco.com and think about what its shopper insight is telling it to do to win sales from you.
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