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Washington Post
Tesco is betting it can get a lift from shoppers by offering what it calls “click and collect.”

UK grocer selling online

– When Nikki Dye tired of supermarket lines, she tried having her groceries delivered, but that meant having to be home for a two-hour delivery window. Now she’s switched to a service where she can order online and then collect her groceries from a local store.

“It’s so quick,” the 25-year-old working mother said as Tesco staff at the store in the southern English town of Harlow loaded her car trunk with goods costing $127.

With same-store sales falling, Tesco is betting it can get a lift from shoppers like Dye by tripling the number of outlets offering what it calls click and collect. The chain’s leading share of the British grocery market shrank to a seven-year low this year as more Britons chose upscale competitors such as Waitrose discounters like Iceland Foods and Aldi.

By year’s end, Tesco expects to complete collection points in 150 stores as part of a $1.6 billion initiative to revive domestic sales.

The grocer is also hiring 20,000 staff, updating its house brand products, refreshing stores and adding more personalized promotions.

Bryan Roberts, an analyst at Kantar Retail in London, said a click and collect service offerse a reason to choose Tesco over competitors. Among Britain’s four grocers, only Wal-Mart Stores’ Asda, the No. 2 chain, has a similar service, which is only in a trial stage.

“It’s going to be a key growth opportunity,” Roberts said. “The economics are much superior to home delivery,” which requires grocers to operate a fleet of vans and drivers.

Tesco, based in Cheshunt, England, expects that making shopping easier will convince customers to come back more often.

Deloitte LLP estimates that people who shop via different methods – the Internet, smart phones and visits to the supermarket – spend more than double those who only shop at physical stores.

Click and collect “is gaining traction, and Tesco is ahead of the pack,” said Clive Black, an analyst at Shore Capital. “While it’s a very modest part of supermarket activity, it is one that’s expected to grow.”

Web sales, which accounted for 3.4 percent of British grocery spending last year, are set to almost double over the next five years, according to the Institute of Grocery Distribution.

Tesco’s domestic sales have declined for the last four quarters, with same-store revenue falling 1.5 percent in the 13 weeks ended May 26. Chief Executive Officer Philip Clarke is seeking new avenues for growth, and expanding click and collect, which started from a store in southern England two years ago, is part of his plan.

The service relies on its simplicity and convenience, said Ken Towle, Tesco’s director of Internet retailing. For a 2-pound fee, a shopper’s groceries are picked, packed and stored at the drive-through point.

When the customer arrives, a staffer loads the groceries into the trunk.

“What customers like is they are in control,” Towle said. “They choose when they want it to be available. It de-stresses the whole experience for them.”

The expansion has come at a cost.

Tesco has had to train staff in customer service and product returns, Towle said. And adding the collection points to stores has cut available floor space.

A big challenge is linking up online orders with picking and packing the groceries in the chosen time-slot from the store, according to Chris Gates, director of retail at Hitachi Consulting, a technology adviser that has worked with Tesco.

Another issue is ensuring stores can handle returns and have enough supplies to account for both online and physical buyers.

“Whilst companies realize it’s the way customers want to shop, it takes a lot of investment to make it happen,” Gates said, noting retailers typically see a return on their investment in two years.