Tesco to take on Amazon with free home delivery for premium cardholders

Tesco to take on Amazon with free home delivery for premium cardholders

August 16, 2020

Tesco is to introduce free home delivery to members of its premium loyalty scheme, pitching it head to head with Amazon as the US tech firm seeks a bigger slice of the UK’s near-£200bn food and drink retail market.

The UK’s largest supermarket charges a basic £4.50 for a delivery slot but its chief executive Dave Lewis says it hopes to scrap the fees for the millions of shoppers who have signed up to Clubcard Plus.

Earlier this month Amazon revealed plans to expand its online grocery service Amazon Fresh – offering fruit and vegetables, cheese and bakery – with free and faster delivery to the 15 million subscribers to its Prime membership scheme.

In an interview with the Sunday Telegraph today, chief executive Dave Lewis said: “I understand the move [from Amazon]. The idea of Prime is very similar to where we are in Clubcard Plus, in terms of bringing a whole bunch of benefits together. So an opportunity into the future for us is to think about how we put delivery into Clubcard Plus. That’s always been the direction of travel.”

Last November Tesco launched Clubcard Plus, a top-tier loyalty scheme alongside the long-established card which then had an estimated 19 million members. For a monthly fee of £7.99, members are rewarded with a 10% discount on two shops of up to £200 each.

There are numerous other perks – with fuel purchases at Tesco forecourts being an exception – and the scheme has been compared with Amazon Prime, for which members pay £79 a year for extras such as faster delivery and streaming services.

Amazon has already won over millions of Britons with its rapid-fire delivery of books, toys and household goods to their front door, and the coronavirus lockdown has made it a lifeline for some.

Lockdown is now easing, but the rapid growth in the size of the online grocery market, from 7.4% of total grocery sales in March to 13% now, according to market analyst Kantar, is unlikely to be significantly reversed. Online specialist Ocado says it has a million customers waiting to sign up, on top of the 800,000 already on board.

Yet Fresh has a long way to go. Amazon has just 3% of the UK online grocery market, compared with Ocado’s 14% and Tesco’s 30% plus, according to market researcher Mintel.

Tesco declined to give more detail about the expansion of Clubcard Plus perks. But retail expert Richard Hyman said: “It is interesting to see Tesco these days following Amazon on deliveries and [discount supermarket] Aldi on price. I think Tesco needs to invest in its own strengths, set its own agenda and not be seduced into following theirs.”

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