Tesco makes move into catalogue shopping

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The Independent Online

Tesco launched its long-awaited assault on the home-shopping market yesterday in a move some analysts estimated could add £2bn to its UK sales.

Britain's biggest grocer has spent £30m on expanding its non-food offer into 8,000 new lines, from sofas to golf clubs, which it will mainly sell over the internet. It claimed it was "raising the bar" in home shopping by promising to deliver most of its goods in a two-hour window - provided customers were prepared to pay up.

Although Tesco is expanding faster than all the country's other supermarket chains combined, it lacks the space in most of its stores to stock a full range of non-food products. To get round this, it will sell the goods over the internet and showcase a smaller selection in a catalogue.

Rivals seized on the fact that Tesco will initially limit its print run to just 2 million and include only one quarter of its new lines, 2,000 items, in the catalogue.

Sara Weller, the managing director of Argos, said: "If it's taken them 12 months to get to this stage then it reinforces the view that this stuff is not that easy to do." She dismissed Tesco's catalogue as a "small brochure". Argos, which made its name as a catalogue retailer, has 17,000 items in its catalogue.

Tesco is seeking to emulate the so-called "multi-channel" retail offer that Argos already provides by offering customers the choice of ordering goods to be delivered to their homes or to collect from one of its stores. To start with, however, its Tesco Direct service will be available from only 15 of its biggest superstores. Customers will have to wait up to 10 days for furniture - as opposed to up to 10 weeks from rival retailers - but will not get to specify the time of day items such as beds get delivered.

"This doesn't feel like a massive attack on Argos territory to me," Ms Weller said.

Tesco's new non-food range will be available online from next Wednesday, although customers will have to wait until November to opt for a two-hour delivery slot. Its catalogue will be ready by 18 September, but only 2 million will be printed.

Andy Higginson, Tesco's finance director, who is also in charge of the group's strategy, said non-food was a "fantastic opportunity" that, over time, will become a "very substantial business [with sales] in the hundreds of millions rather than the tens of millions".

Analysts at Citigroup estimated, in the medium term, non-food sales could add £2bn to Tesco's UK sales, which were £27bn last year. "We expect this to be another winner," they wrote in a research note, adding that Tesco Direct could be exported to developed international markets such as Korea and Ireland.

Steve Robinson, the chief executive of Tesco Direct, said the new online offer would enable the group to sell more expensive products, such as £900 cameras and £150 irons. Customers will be able to pay through hire purchase and buy cheap warranties, he added.

Tesco has invested £30m on two new distribution centres and 300 extra staff, and has upgraded its website.