Asda to expand online home delivery service

Asda is planning to open 12 to 15 home-shopping delivery centres in the next three to five years as the supermarket group expands its Asda@Home Internet shopping service. The increased investment in the service will mean that Asda@Home will be extended across virtually the whole of the south of England by 2004.

Asda is planning to open 12 to 15 home-shopping delivery centres in the next three to five years as the supermarket group expands its Asda@Home Internet shopping service. The increased investment in the service will mean that Asda@Home will be extended across virtually the whole of the south of England by 2004.

Asda already has two "fulfilment centres", one in Croydon and the other in Watford. Two further centres will open next year serving east and west London. The plans are likely to accelerate after that.

Allan Leighton, who was last week named as head of European operations at Wal-Mart, which took over Asda in June, said the plan would not involve a huge increase in capital expenditure. Each depot costs about £7m to build, around a third of the cost of developing an Asda hypermarket.

Asda is using the service to increase its market share in the south, where it has few stores. It has not yet decided whether to extend the service in its north of England stronghold, where there is a danger it could affect sales in its existing outlets.

The Asda@Home service offers 5,000 lines to customers who pay a £3.50 charge for delivery provided the minimum order is £50. The service is free to shoppers spending over £150.

Asda's move is part of a major push by the big supermarkets to expand their home-delivery operations. Tesco claims it is on track to become the world's largest Internet grocery service by next year, when it will have a nationwide operation in the UK. Tesco Direct operates out of 100 stores and charges £5 for delivery. It will be offered from 120 stores by next February.

Sainsbury's last week announced that its first home delivery "picking centre" will be opened in Park Royal, North- west London, next summer. The 120,000 sq ft warehouse will stock 15,000 lines and be used for Sainsbury's Orderline service.

Sainsbury's has decided to follow Asda by running its stores from dedicated warehouses, rather than Tesco's approach which is to employ staff to select Tesco Direct orders from its existing stores. Tesco's approach has enabled it to roll out its service quickly, enabling it to establish the brand and secure a first-move advantage.

But experts say that longer term it will be more cost-effective to pick goods from dedicated centres rather than stores.