Tesco takes internet home delivery to US

Tesco formally launches its internet home shopping service in the United States today as part of a deal with Safeway, the American supermarket group.

The service will be run under the Safeway name and be operated from five Safeway stores in Portland, Oregon. The US group is completely separate from the UK company of the same name.

The launch of the service represents a coup for Tesco, which will be exporting British know-how to a market that was supposed to be the world leader in internet grocery deliveries. It is launching in exactly the same area of the US where the high profile WebVan grocery delivery business collapsed last year. But while WebVan burned through over $400m (£276m) in a failed attempt to deliver groceries from standalone warehouses, Tesco has built a successful operation picking internet orders from its stores.

John Browett, Tesco.com's chief executive, said the US business could achieve annual sales of £1bn. "US internet penetration is 60 per cent compared with 40 per cent in the UK and given the size of the population we believe the US business could be at least three times the size of Tesco.com."

In the UK Tesco.com has over a million registered users and receives over 70,000 orders a week. It is expected to achieve sales of £300m this year though the service is still loss-making.

Mr Browett said trials of its Safeway.com service in Portland had proved successful. "Because HomeGrocer and WebVan operated in this market before there is all this latent demand."

Asda announced last week that it had closed its two home delivery depots in Croydon and Watford. It will pick internet orders from its stores instead.