Tesco strengthens its online business

On June 25, Tesco Plc, UK's largest grocery group, announced it would pay $22m for a stake in American grocery group Safeway Inc.'s online outlet GroceryWorks to get a toehold in the world's largest home-shopping market. In a statement, the two companies claimed that in return, Safeway's GroceryWorks would benefit from the know-how that has made Tesco.com​ the world's biggest and only profitable online grocer. Under the deal, Tesco said it had taken a 35 per cent stake in GroceryWorks for $22m cash, intellectual property and technical resources. Safeway​ holds 50 per cent of the business and the rest is held by other shareholders. "This is a very good combination of Safeway's very strong business in the United States, which reaches 150 million customers, and our expertise as the clear leader in online shopping,"​ said Terry Leahy, Tesco's chief executive. In Britain, Tesco's 50 million customers will generate online sales of around $423m this year. Safeway's US customer base is three times that size. Vasant Prabhu, Safeway's chief financial officer and president of e-commerce, said the aim was to turn GroceryWorks into the biggest online grocer in the United States. Prior to Monday's announcement, Tesco had spent 40 million pounds developing its online business. Source: Reuters