Tesco has launched an online marketplace, giving customers the chance to buy thousands of third-party products alongside their groceries.
When it reaches full scale, the marketplace will make Tesco.com “a one-stop shop for everything customers need”, the supermarket said.
Initial market launch today [Tuesday 4 June] sees nearly 9,000 products listed, across all categories, including garden, DIY, homeware, toys and pet care. Products appear alongside Tesco groceries on Tesco.com and the Tesco app, but are filled directly by the supplier.
“At the end of the day, it all comes down to wanting to give our customers access to more than we have,” Peter Filcek, market director at Tesco, told The Grocer.
“We were looking at customer searches on our websites and found things that we just don’t carry in Tesco [stores] or online, and so that sparked a train of thought about what we could do to open up that range, to give customers what they were looking for because they were really looking for all kinds of things.”
Last week, for example, the ‘no result’ search term on Tesco.com was suitcases. From today, the suitcases are available on the site.
“We are now able to meet truly quantitative customer demand in a way that we could never mobilize a retail supply chain to do. So we’re going to go where the customers tell us to go, where the opportunities are,” said Filcek.
How Tesco Market works
Around 17 retailers are on the market at launch – all of which have been vetted “to ensure they meet our stringent requirements and standards”, Tesco said. Several household brands are among those now available, including Tefal, Silentnight, Tommee Tippee and Charles Bentley.
Sellers will be continuously monitored based on factors such as delivery speed, returns and delivery success rates, and soon metrics such as customer ratings and reviews.
Shoppers pay for third-party items separately from their grocery store, with marketplace items paying their own separate delivery fees. For Saver Delivery customers at any time, or if an order is over £50 from the same seller, standard deliveries are free. Shoppers will be able to earn Clubcard points on all purchases. Items will be clearly labeled as coming from third-party sellers.
Filcek said the market range and supplier base “should grow rapidly over the summer” and will grow “as quickly as we’re comfortable with”.
“We want to reach far enough that we’re a destination — that you have critical mass and credibility in each of those categories. But not that big [shoppers] they end up getting in the way of trivial things and it becomes a problem and gets inside [their] way. Equally, we don’t want to chase a number if it means bringing in vendors who can’t deliver on the promises we make to our customers, or who disappoint us on ongoing compliance, or who have further problems,” he said.
“So it’s definitely going to get bigger, but it’s going to get bigger at a pace that we’re comfortable with, that we’re confident is the right thing for our customers,” Filcek added.
The retailer is understood to have been working on the technology underpinning the market for the past two years. The launch follows a trial phase with Tesco colleagues in recent months to test and learn how customers would use the platform. The Grocer was first to report the supermarket was gearing up for launch in October and has built a team responsible for recruiting retailers and working with them on “range, merchandising and promotion strategies”.
A job listing for the role at the time said the market is a “key pillar” of Tesco’s strategy to be the “easily more convenient” grocer – a strategy set for late 2021 to serve customers “wherever, whenever and however they want. to be served”, with online playing a big role.
Tesco Direct 2.0?
The marketplace model is not new to Tesco, which in 2012 opened up its non-food offering Tesco Direct to third-party retailers. Tesco Direct ceased trading in July 2018, with the company saying there was no prospect of the loss-making concern becoming profitable. Along with hundreds of job losses, its closure saw around 300 dealers lose a small but strong sales channel.
Analysts argued that Tesco Direct was too protectionist when it came to the retailers it would accept, being overly cautious about listing products that could compete with its own.
“Things have moved on since Tesco Direct,” Filcek said. “Our online business is significantly different from where it was before. We’re currently shipping 1.2 million orders a week, and over that time we’ve invested and iterated on our retail platform, our online shopping experience, and that’s what we’re paving the market for.
“Tesco Direct was a separate website, with its own login, fulfilled by Tesco. This is fully integrated into our dotcom shopping experience and delivered by the seller. So a much easier shopping experience, much more organic and easy to discover, but also a much more scalable business because everything comes from the seller,” added Filcek.
Tesco recently launched an online marketplace – Tesco Exchange – which allows suppliers to cut costs and reduce food waste by selling or donating excess stock to other producers. The service, which launched in November, is available to more than 3,500 Tesco suppliers. However, no direct sales are made on the platform, with agreements made between private buying and selling parties.
Other supermarkets and retailers have launched market models, including Walmart, Kroger, Auchan, Carrefour, Ahold Delhaize and Boots.
Asked if Tesco.com would now compete with Amazon, Filcek said “there is a difference”.
“What we’re doing at Tesco is really focusing on what we believe Tesco shoppers want and trying to find that line between scale, quality and trust. Our launch is nowhere near Amazon’s scale. We’re really trying to make sure we hit those marks in performance, in quality, in confidence, and that’s always going to be our guardrail, that’s always going to be our watchword,” he said.
“We have no ambition to copy anyone else. We’re actually trying to do something a little bit unique and find that balance of an established grocery business with a multi-channel marketplace that offers what you might be looking for somewhere like Tesco, but that’s not going to the nth degree. it does not sacrifice ease of experience or confidence in a degree pursuit.”