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Tesco responds to Amazon challenge with free delivery offer

Tesco is set to respond to Amazon’s entry into the UK online grocery market with its own free delivery service.

CEO Dave Lewis said the supermarket will add free delivery to its loyalty scheme, Clubcard Plus, in an interview with the Sunday Telegraph.

Lewis explicitly referenced the recent news from Amazon that it would add free delivery to Prime in certain areas of the UK. The service is available already in 40 postcodes across the south-east, including in London, Woking and Guildford. It will be extended to the rest of the UK by the end of the year.

Clubcard Plus launched in November, offering a 10% monthly discount on groceries with some other perks for a £7.99 monthly subscription.

While the online grocery sector has seen a boom during the pandemic, questions remain over the model’s profitability due to the high logistics costs associated with it.

The sector is facing further disruption next month as Waitrose’s agreement as Ocado’s main supplier ends, meaning that it is bolstering its own online offering to try and win the latter’s customers. The highly automated model of Ocado reduces costs but leaves the retailer struggling to flex upwards during periods of high demand as the maximum capacity is set by the throughput of its robotics hardware.