Tesco is planning to offer free delivery on online grocery orders for members of its Clubcard Plus loyalty scheme as an industry price war intensifies.
The move comes after Amazon revealed last month that it would start to offer free food deliveries for users of its Amazon Fresh service amid a drive to expand its grocery service. The US online retailer is offering free delivery to customers with a Prime account, which costs £7.99 a month — an offer seen by some industry analysts as a “nuclear” option that threatened to wipe out the profit margins of traditional supermarkets if they tried to compete.
Tesco is now working on plans to replicate that offer for members of Clubcard Plus, which charges the same monthly fee of £7.99 but rewards members with benefits including double data on its mobile phone service and 10 per cent off the cost of two big shops per month in its stores.
Dave Lewis, 55, Tesco’s outgoing chief executive, told The Sunday Telegraph that adding deliveries to Clubcard Plus had “always been the direction of travel” and part of a strategy to “bring a whole bunch of benefits together” in its loyalty scheme.
However, adding free deliveries to the Clubcard Plus scheme comes in spite of Mr Lewis having recently admitted that the supermarket — Britain’s biggest food retailer — was still struggling to make a profit on online groceries and saying that increasing delivery charges could be the only route to making money.
Tesco has said that it expects to make £5.5 billion in online sales this year, compared with £3.3 billion last year, as online sales have risen sharply to represent 16 per cent of Tesco’s revenues.
Mr Lewis warned that he would have to ensure that Tesco could “match capacity with online demand” before introducing free delivery.
During the pandemic, soaring demand for food deliveries has prompted the chain to increase its delivery slots from more than 600,000 a week to 1.3 million, but it has still encouraged shoppers to visit stores to help to prioritise vulnerable customers. Tesco suspended its delivery subscription service during the lockdown, but brought it back for existing customers in June. The Delivery Saver costs £7.99 a month, while individual deliveries cost £4.50.
