News Tesco UK: taking on amazon and 16,000 more jobs

Tesco have today announced that they had a 600,000 growth in online customers from the start of the COVID-19 pandemic until now, with an increase of online share of sales growing to 16% from 9%. Tesco have announced that in order to deal with this they are recruiting 10,000 staff to pick orders and 3,000 delivery drivers, also adding many of these roles are likely to go to the temporary staff hired during the pandemic.

There is obviously a good economic news story in providing jobs, but for retailers the impact of the extra costs of staff, fuel and vans (400 extra for Tesco) is unknown. Interestingly one of the less reported items from their June trading update is that people are making fewer trips (-32%) but basket size when going is up 64%. Total group revenues rose 7.9% which no where near matches its online revenue increase of 48%.

The fear for all retailers is that they have all the overheads including staffing for their bricks and mortar stores (especially given the hygiene and supervision that shoppers require as COVID-19 still circulates) but added to this is the costs of online and the different logistics and supply chain changes needed to support this shift change in operational style, along with the increased costs for pay for vulenerable and sheilded staff. The net effect remains to be seen.

Tesco are clearly strategising about their place in the market as their Chief Exec Dave Lewis stated in the Sunday Telegraph that they hope to scrap the Clubcard Plus fees to allow discounts and free deliveries. There is still plenty of space between Tesco and Amazon in the grocery market (30%+ share vs. 3% according to Mintel) so it will be interesting to see Tesco's attempts to hoard and hold whilst Amazon implement their strategy.