Tesco has launched an online marketplace, giving customers the ability to shop thousands of third-party products alongside their groceries.
When it reaches full scale, the marketplace will make Tesco.com “a one-stop shop for everything customers need” the supermarket said.
The initial launch of the marketplace today [Tuesday 4 June] sees around 9,000 products listed, across categories including garden, DIY, homeware, toys and petcare. Products appear alongside Tesco groceries on Tesco.com and the Tesco app, but are fulfilled directly by the supplier.
“Ultimately it all boils down to wanting to give our customers access to more than we carry,” Peter Filcek, marketplace director at Tesco, told The Grocer.
“We were looking at customer searches on our websites and we found things that we just don’t carry in Tesco [stores] or online, and so that prompted a stream of thinking around what we could do to open up that range, to give customers what they’re looking for because they were genuinely looking for all sorts of things.”
Last week, for example, the ‘no results’ search term on Tesco.com was suitcases. Suitcases are, from today, available on the site.
“We’re now able to meet really quantified customer demand in a way that we could never mobilise a retail supply chain to do. So we’ll go where the customers tell us to go, where the opportunities are,” Filcek said.
How Tesco marketplace works
Around 17 sellers feature on the marketplace at launch – all of which have been vetted “to ensure they meet our robust requirements and standards” Tesco said. Several household brands are among those now available, including Tefal, Silentnight, Tommee Tippee, and Charles Bentley.
The sellers will be monitored on an ongoing basis based on factors like delivery speed, returns, and delivery success rates, and soon metrics like customer ratings and reviews.
Shoppers pay for the third-party items separate to their grocery shop, with marketplace items incurring their own, separate delivery fees. For Anytime Delivery Saver customers, or if an order is over £50 from the same seller, standard deliveries are free. Shoppers will be able to earn Clubcard points on all purchases. Items will be clearly labelled as coming from third-party sellers.
Filcek said the marketplace’s range and supplier base “should be increasing quickly over the summer” and would scale up “as quickly as we’re comfortable with”.
“We want to go big enough that we are a destination – that you have critical mass and credibility in each of those categories. But not so big that [shoppers] end up tripping over irrelevant stuff and it becomes a problem and gets in [their] way. Equally, we don’t want to chase a number if it means bringing on sellers that can’t fulfil the promises we make our customers, or that let us down on ongoing compliance, or have problems further down the line,” he said.
“So it’s definitely going to get bigger, but it’ll get bigger at a pace we are comfortable with, that we’re confident is the right thing for our customers,” Filcek added.
The retailer is understood to have been working on the technology underpinning the marketplace for the past two years. The launch follows a trial phase with Tesco colleagues in recent months, to test and learn how customers would use the platform. The Grocer was first to report the supermarket readying for launch in October, and building out a team responsible for recruiting sellers and working with them on “range, merchandising and promotional strategies”.
A job listing for the role at the time said the marketplace is a “key pillar” of Tesco’s strategy to be ‘easily the most convenient’ grocer – a strategy set out in late 2021 to serve customers “wherever, whenever and however they want to be served”, with online playing a major role.
Tesco Direct 2.0?
The marketplace model is not a new one to Tesco, which in 2012 opened up its non-grocery offering Tesco Direct to third-party sellers. Tesco Direct ceased trading in July 2018, with the company saying there was no prospect of the loss-making concern becoming profitable. Along with hundreds of job losses, its closure saw around 300 merchants lose a small but solid sales channel.
Analysts argued Tesco Direct was too protectionist when it came to the sellers it would accept, with overcaution about listing products that might compete with its own.
“Things have moved on since Tesco Direct,” Filcek said. “Our online business is significantly different to where it was before. We’re currently shipping out 1.2 million orders a week and over that time we’ve invested and iterated into our retail platform, into our online shopping experience and that’s what we’re layering marketplace into.
“Tesco Direct was a separate website, with its own login, fulfilled by Tesco. This is fully integrated into our dotcom shopping experience and it’s shipped by the seller. So, a much easier shopping experience, much more organic and easy to discover, but also a much more scalable business because everything comes from the seller,” Filcek added.
More recently Tesco launched an online marketplace – Tesco Exchange – which allows suppliers to cut costs and reduce food waste by selling or donating surplus stock to other manufacturers. The service, which launched in November, is available to more than 3,500 Tesco suppliers. However, no direct sales are made on the platform, with arrangements made between buying and selling parties privately.
Other supermarkets and retailers have launched marketplace models, among them Walmart, Kroger, Auchan, Carrefour, Ahold Delhaize and Boots.
Asked whether Tesco.com would now be competing with Amazon, Filcek said “there’s a difference”.
“What we’re doing at Tesco is really focusing on what we believe Tesco shoppers want and trying to find that line between scale and quality and trust. Our launch is nowhere near Amazon’s scale. We’re really trying to make sure we hit those marks on performance, on quality, on trust and that will always be our guardrail, it will always be our watchword,” he said.
“We don’t have an ambition to copy anybody else. Actually, we’re trying to do something a little bit unique and find that balance of an established grocery business with a multi-channel marketplace that provides what you might look for at somewhere like Tesco, but that doesn’t go to the nth degree, doesn’t sacrifice the ease of experience or the trust in a chase of scale.”
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