Tesco and Sainsbury battle for home-shopping market

BRITAIN'S TWO leading supermarket groups unveiled fresh plans to expand their online shopping services yesterday as the e-commerce grocery battle hots up.

J Sainsbury announced it has chosen Park Royal in north-west London for its first home-delivery "picking centre". The 120,000 sq ft warehouse will stock 15,000 lines and be used for Sainsbury's Orderline service, through which shoppers order by phone, fax or Internet and pay pounds 5 for delivery. The pounds 7m centre is due to open next summer and will create 400 to 500 jobs.

Angela Megson, Sainsbury's director in charge of Orderline, said: "We believe the home- shopping market within the M25 is underdeveloped and its potential is relatively unexplored."

Separately, Tesco said its Tesco Direct home-shopping service is on track to become the world's largest Internet grocery business by early next year.

Tesco Direct currently operates out of 100 stores and is already profitable. It will be offered from 120 stores by February, with a nationwide service planned for later in the year.

"E-commerce is an increasingly important part of our business," Tesco said, adding that it had recently added books, gifts and personal finance to its Internet offer.

Tesco's comments came as the group reported strong sales in its third- quarter trading statement. In the 14 weeks to 20 November, UK sales were up by 7.3 per cent, or 4 per cent on a like-for-like basis. Tesco said the increase in volumes had been driven by price cuts as the Wal-Mart effect tightens its grip.

Tesco said its figures showed it was continuing to outperform the industry and increase market share. Tesco's figures compare with Sainsbury's recent announcement that its underlying sales are down by 1.3 per cent. Safeway has recorded growth of 2.4 per cent, helped by lower prices.

Analysts said Tesco's figures were in line with expectations, although the shares closed 4.75p lower at 169.5p. "The market is now so negative on retail stocks that any news is viewed badly," one analyst said.

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