Britain's number one supermarket, Tesco, will be the online victor in its sector with 27% of the market, according the latest report from e-commerce consultancy, E-Insight.
But the fruits of its efforts – and those of rival J Sainsbury – will not be enjoyed quickly, warns the study, which predicts an eventual move into the black by 2005. In the interim, the duo will incur “significant losses” and require respective investments of up to £400 million and £160m.
Online sales in the supermarket sector are forecast to grow to £30 billion by 2008 - almost half of Britain's £75bn total online market at that time. By then, says E-Insight's chief executive Alan Taylor, Tesco could be creaming around £500m from the internet, or over 30% of its global pre-tax profits; while Sainsbury can expect online earnings of about £230m. “That.” explains Taylor, “is why they can justify the next five years of cumulative e-commerce losses."
The report also names Waitrose, the supermarket arm of the John Lewis Partnership, as a likely contender among the food-related etail giants. The trio are likely to enjoy a collective dominance that will “make it very hard for new entrants”, and the savings from land-based investment could result in "brutal pricing" to strengthen their collective grip on the online market.
News source: Financial Times