GroceryWorks, a loss-making internet shopping service owned by American supermarket giant Safeway, is ceding a 35% stake to Britain’s largest supermarket chain, Tesco. Safeway operates 1,747 stores across the western and mid-Atlantic states as well as western Canada.

Tesco, whose own online shopping service, Tesco Direct, is in the black, is investing $22 million in cash along with intellectual property and technical resources, and says that the first approach was made by the US giant. According to Tesco finance director Andrew Higginson: “GroceryWorks hasn't really worked for them, and we have a profitable model.”

Unlike many of its rivals on both sides of the Atlantic the UK business eschews centralised warehousing, instead operating order fulfilment within its bricks and mortar stores. It has almost one million registered customers generating annual sales of some £300 million ($434.6m)

Texas-based GroceryWorks, operational since January 2000, will close today, relaunching under the Safeway brand later this year. Unlike the British grocer it will retain a warehouse-based business model.

According to a report by market research consultancy Datamonitor, the online grocery sector in the US has risen from an annual spend of $0.8m in 1996 to $1.7bn last year. It could, predicts the researcher, soar to $32.3bn by 2005.

News source: Financial Times