Tesco draws a drastic move by shutting down Tesco Direct
Tesco is one of the largest grocery chains in the UK, and it is well known for providing online grocery shopping with home delivery service included. As such it is one of the most popular options out there.
Still there was a part of the company that was generating losses for 12 years! Namely, Tesco Direct, a separate website that was selling home furniture, appliances, and clothes was perpetually unprofitable! It was meant to compete with Amazon and Argos, but it was utterly unable to produce anything apart from financial losses. In the past years, Amazon expanded radically and the management of Tesco didn’t see any option that could save the project and make it profitable.
As a result, Tesco Direct will cease working on July 9th 2018. The entire project will be put to rest, and it will have some far-reaching consequences. Namely, some 500 people are in jeopardy of losing their jobs, and that will produce further consequences.
Although unpopular, this move seems to be necessary according to the management.
Charles Wilson, who is the head of Tesco UK chain said this was a forced move and that it was a decision that was hard to make. Still, he claims that this was a necessary move in order to establish a sustainable model for non-food trade within the franchise, and that the focus was entirely on future moves and future experience for their customers.
At the current situation, Tesco Direct website simply couldn’t be profitable due to the volume of sales generated and the expenses connected to running and maintaining business, as well as the fulfilment expenses that were too high.
According to other company directors and analysts, the time of reckless expansions to new markets without assessing the real value behind these moves is long gone. The new approach in expanding to new segments and niches will be always assessed through potential profitability in order to avoid cases similar to Tesco Direct.