Budgens abandons online sales as Tesco widens Net service

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The Independent Online

The gap between the success stories and the failures in the intensely competitive internet market grew yesterday when Budgens announced it was pulling out of online sales while Tesco said it was increasing its proposition.

The gap between the success stories and the failures in the intensely competitive internet market grew yesterday when Budgens announced it was pulling out of online sales while Tesco said it was increasing its proposition.

Budgens' chief executive, Martin Hyson, said investment in Budgens Direct, of £1.2m last year and a similar sum this year, had been "totally prohibitive" for the "minimal" number of customers the Net service had attracted. In a separate announcement, Tesco.com, the UK's largest online retailer, said it was expanding from online food sales by launching the sale of electrical goods over the Net.

John Browett, chief executive of Tesco.com, commenting on the growing division between large and small players, said: "When the going gets tough the strong get stronger."

Tesco.com said it takes 60,000 orders a week, generating sales of £5m, and said 750,000 people have registered with its site. Mr Browett said the increased online offering is Tesco's key strategy to fight off competition from the likes of Wal-Mart, the bargain basement giant that owns Asda.

The move, launched with the catalogue company Grattan, will intensify pressure on rivals, as Tesco has become the first online retailer to offer free delivery and removal of old items.

Budgens' rival, Somerfield, also abandoned internet sales in July after a disappointing take-up by customers. The two casualties leaves the UK's biggest retailers to carve up the internet market between them. Tesco, the largest online food grocer in the UK, and Iceland, the number two, have recently announced that they either break even or are on the brink of doing so from internet sales.

Budgens' shares were unchanged at 75.5p yesterday. Confidence was bolstered by a solid trading update, which showed overall sales increased 4 per cent in the 19 weeks to 10 September.

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