Tesco is shutting down its clothing and homewares website Tesco Direct in a surprise move that puts 500 jobs at risk.
Staff were briefed on Tuesday afternoon about the decision to close the loss-making website which was the supermarket giant’s attempt to take on Argos and Amazon by selling everything from sofas to TVs and toys.
Tesco admitted it couldn’t see a way to make the website, which launched in 2006, profitable. As a result the retailer said approximately 500 staff were at risk of redundancy.
“This decision has been a very difficult one to make, but it is an essential step towards establishing a more sustainable non-food offer and growing our business for the future,” said Charles Wilson who recently took over as boss of Tesco’s UK chain. “We want to offer our customers the ability to buy groceries and non-food products in one place and that’s why we are focusing our investment into one online platform.”
Tesco has been running two separate internet businesses in tandem: Tesco.com for for grocery home deliveries and the Direct catalogue-style website for household goods and clothing, including its own F&F brand.
Tesco said the website, which will cease trading on 9 July, had struggled with the high cost of fulfilling orders and online marketing. Tesco said the plan would mean the closure of the distribution centre at Fenny Lock, Milton Keynes, which handles Tesco Direct orders.
Tesco Direct was one of the many pushes launched during the expansionist reign of Sir Terry Leahy in which the retailer became a jack of all trades, with side projects that included building flats, running a bank as well as selling groceries, clothing and household goods online.
Current boss Dave Lewis, who took charge in the wake of the 2014 accounting scandal, has led a radical restructuring of the UK’s biggest retailer. He sold a number of businesses, including its South Korean chain Homeplus for £4bn, and pushed through a programme of large-scale domestic job losses.
Last year Lewis did his first major deal with the purchase of the Booker cash and carry chain, led by Wilson, for £3.7bn. The complexity of bashing together the two businesses, which have combined turnover of nearly £60bn, means the loss-making Direct business was a headache neither executive needed.
“I think this shows a renewed focus on the machine that is Tesco,” said Steve Dresser, retail analyst at Grocery Insight. “The days of going after markets with no realistic proposition of them adding value are long gone.”