TESCO TO USE RETAIL BASE TO BUILD ON-LINE SUCCESS

KIM ANN ZIMMERMANN

MONTEREY, Calif. -- Tesco plc plans to tap into its existing customer base and its existing retail technologies such as frequent-shopper programs to build its on-line business, said Paul Arnold, home-shopping business consultant for the Cheshunt, England, retailer.

Arnold spoke to an audience at the FMI IT Leadership Forum, which was held here earlier this month and sponsored by the Food Marketing Institute, Washington.

In Tesco's home-shopping model, order picking is done at the store level, so customers must be within the delivery area of a particular store to participate. "We've got the system currently in 57 stores, and plan to have it in 100 stores by the end of the year," Arnold said. "Fulfillment from the stores, rather than the warehouse, is the most pragmatic approach for us at the moment," he noted.

Arnold noted that, unlike retailers who strictly sell on-line, Tesco can make the most of its retail technology to boost on-line sales. "We want to build a powerful presence on-line, and we found that we can leverage a lot of our legacy systems, such as our loyalty program," he said. He noted that customers can use their loyalty cards to shop at the store or on-line, and Web customers who participate in the retailer's frequent-shopper program see a list of favorite products based on their purchases with their card.

Arnold said Tesco has worked to improve the accuracy and efficiency of in-store picking by introducing scanners that the pickers use to scan the items as they assemble the customer's order.

"We suffered from a lot of mispicks in the beginning. We knew that, to be successful, we had to improve that area, and we did," he noted.

The retailer has also improved speed and accuracy by reducing handling. The order is picked and put directly in the van by the picker, eliminating the need to store the order in the store and reducing the possibility that the order could get misplaced. "We have a two-hour window which we offer our customers for delivery, and we need to meet that window," he said.

He also said it was important to link the home-shopping system with the retailer's other systems for its brick-and-mortar business, such as point-of-sale, labor-scheduling and inventory management.

Linking the home-shopping system to the store system is particularly crucial, he said, so that on-line customers are charged the same price as customers who visit the stores.

Accurate inventory data is also crucial to the success of Tesco's home-shopping system, Arnold pointed out. "With the store-based picking, there is certainly the possibility that someone has gone into the store and cleared the shelves of champagne and we don't have any for a home-shopping order. But by linking our systems, we can minimize that possibility and do our best to meet demand."

He also noted that incorporating the home-shopping system has been helpful in ensuring that the stores are properly staffed to handle the picking.