UK Grocery Retailer Deep Dive: Tesco

How brands can benefit from Tesco’s omnichannel strategy and retailer dominance to win the digital shelf

In this new series for food and beverage brands we uncover how to increase e-commerce sales at the UK’s leading online supermarkets. Today we look at Tesco, the biggest of the ‘Big Four’ UK supermarkets alongside Asda, Sainsbury’s and Morrisons. Tesco currently commands 27% of the overall market share, almost twice as much as its closest rival, Sainsbury’s (15%). Tesco.com is the second most visited grocery website worldwide, receiving over 25 million visits per month, and 28% of them make a purchase - the highest conversion rate of all UK grocery websites. 

Source: Statista

Read on to learn how Tesco’s omnichannel strategy helped it rise to the top, and how brands can benefit from its retail dominance. You’ll also learn the fundamentals behind increasing sales on Tesco, including how to crack Tesco’s search algorithm, how to create product pages that convert, and how to measure your performance across your portfolio so you know where you stand against your competitors and where to focus your efforts. 

Tesco was an eCommerce pioneer

Tesco launched its online store Tesco.com in 2000, though its history as ecommerce pioneer goes back much further. Decades earlier Tesco was already thinking about how to expand its sales channels. In 1984 Tesco developed a way to take a domestic TV in a home and turn it into a computer terminal so that customers could order deliveries through their remote control (a technology called “Videotex”). The pioneering purchase was a 72-year old grandmother in Gateshead who used the service to order margarine, cornflakes and eggs. The order was sent via her phone line, packed and delivered by her local Tesco. Tesco went on to start its online shopping service ‘Tesco Direct’ in 1997. By January 2000 it was the biggest online grocery store in the world with annualised sales of £125 million and 2,000 new customers signing up with Tesco Direct every week. 

The key to Tesco’s success is in how they leveraged multichannel retailing from the get-go to evolve the business such that both online and offline channels benefited.

Tesco’s omnichannel strategy: synergy between in-store and online

Tesco’s website has always been simple, with the aim of providing a straightforward shopping experience, similar to their approach with physical stores. CEO Laura Wade-Gery has stated that her aim with Tesco.com was for customers to have a complimentary experience to their in-store shop, particularly: 

• I know Tesco will have it
• I trust Tesco to offer me great value 
• Tesco.com makes it easy for me to shop
• I don’t have to think about it; it simply works

And with the Tesco Clubcard - held by more than 20 million British households, 8.5 million via the Tesco app - Tesco was able to collate data on shopper behaviour both online and offline, making it easier for shoppers to have a smoother shopping experience whether they were shopping in-store, on their computer, or on their phone. 

Especially in the first  year of Tesco.com, we received numerous comments from new customers who couldn’t find a lot of the items they regularly bought offline; the choice was  simply overwhelming. Now, if first-time online shoppers already have a Clubcard, our system will  recognize that and automatically populate their shopping list with the items they usually buy in the supermarket, making it a lot easier for new customers to find the items they want. Besides, we can track how many online shoppers are also frequent Tesco store shoppers and how many we are drawing from other grocery retail chains.”

- Laura Wade-Gery

Tesco was particularly smart about how to address the conflicts that can arise when a bricks-and-mortar business adds an online channel, namely around distribution. Tesco didn’t start its online business with a warehouse model, where distribution out of dedicated fulfilment centres risks taking business away from the physical stores. Tesco instead started with the simplest fulfilment model of in-store picking, then progressed slowly to a hub model that leveraged existing large stores. The bonus was that in-store pickers were able to report on out-of-stocks allowing stores to resupply faster from the central warehouse. Effectively, in-store picking meant that the online channel was able to contribute to the success of the physical channel. Availability continues to be one of Tesco’s main priorities. And their iterative approach to ecommerce allowed them to scale both online and offline channels and gain the advantage of other retailers. 

This is a boon for brands, who can benefit from Tesco’s dominance in the marketplace, namely through the vast numbers of shoppers visiting this retailer every day, both online and in-store, as well as the Clubcard scheme which drives customer loyalty. If someone buys your brand - online or in a physical store - Tesco will continue to recommend your products online and via the app as part of its personalised experience. 

Tesco is the second most visited grocery website worldwide, receiving over 25 million visits per month, and 28% of them make a purchase - the highest conversion rate of all UK grocery websites. Naturally if you’re a brand selling on Tesco, it’s worth your while to be seen on the shelves and grab a piece of the pie. 

3 ways Tesco rules the omnichannel experience by personalising the shopper experience through data 

1. Tesco Clubcard, a loyalty card available as a physical card or with an app. Tesco uses the card to collect data about shoppers: why they live, where they shop, how much they’ve spent, and more. 
2. Tesco Grocery app, which links with the Clubcard and allows you to shop online and collect either by delivery or click-and-collect. 
3. Personalised offers and recommendations, driven by data collected via Clubcard purchases in-store and online. Through data, Tesco knows its shoppers, and is able to personalise their experience, showing them what they want, upselling on the most relevant products, and growing loyalty along the way 

How Tesco Turned Covid-19 Into an Opportunity

When the pandemic hit, Tesco swiftly adapted its business model by doubling its delivery capacity in just five weeks and increasing the availability of its click-and-collect service. It also ramped up the development of its urban fulfilment centres (UFCs) to drive the increasing demand for online grocery deliveries. By Q1 2021, online sales were 22% higher than in 2020, and 81% above 2019 levels. Even after shops and hospitality businesses reopened, Tesco’s e-commerce sales continued to grow. Tesco continues to innovate when it comes to delivery and fulfilment. In 2021 it launched its own one-hour ‘Whoosh’ rapid delivery service, with plans to make it available from at least 600 stores by the end of 2023. The “sweet spot” according to Tesco chief executive Ken Murphy is Tesco’s UFCs which can capture and process an order in 7 minutes.

Tesco’s Covid strategy helped them realise a notable surge in ecommerce sales that has continued even after lockdown measures were lifted. Source: ecommerceDB

Tesco’s eCommerce strategy reflects the company’s core values

Both online and in its physical stores, Tesco is all about: reasonable prices, convenience, and customer service. In many ways this has followed through with its website. 

• The design is simple and minimalistic, designed to be easy to navigate so that customers can quickly get to the products they want. 
• The first thing the shopper sees when they load the website is the search bar and category listings
• Value is a big part of product placement, with Clubcard deals and special offers taking precedent across the website, alongside Aldi price matching and “Low Everyday Price”
  
  

Know your retailer: decoding the Tesco algorithm

Winning on Tesco.com is all about mastering the two fundamental rules
for increasing eCommerce sales: 

1. Increase traffic to your product pages
2. Create product pages that convert 

Let’s look at how this works for Tesco…

Getting Traffic on Tesco

In order for people to view your products on Tesco, they need to be able to find them. 

• Are your products in stock in the first place? 
• Can you be found through Tesco’s category taxonomy? 
• Can you be found on search? 
• Are you showing up for all the correct filters? 

Availability: Protect Out of Stocks

Part of Tesco’s long-time success is down to its fine-tuned logistics and supply chain strategy that ensures the products people want are in stock. Still, this doesn’t make brands immune to the perils of out-of-stocks. Tesco’s algorithm is unusual in that it includes out of stock products amongst product listings (sometimes in the top positions). The risk here if your OOS is that shoppers will buy a different brand, particularly as Tesco’s call to action is “Rest of shelf”, taking shoppers to the overall category page which contains numerous competitor products. 

Despite growing cost pressures and supply chain challenges in the industry, we continued to invest to protect availability, doubled down on our commitment to deliver great value … this put us in a strong position to meet customers’ needs … As a result, we outperformed the market, growing market share and strengthening our value proposition.

- Tesco Chief Executive Ken Murphy
(talkingretail.com)

Are you visible in all of the correct categories and subcategories?

Not all shoppers use free text search to find the products they want on Tesco.
If your product isn’t featured in the relevant category and subcategories, then browsing shoppers may not be able to find your product and buy it.
Category visibility is key to conversion: it makes your product more likely to be found and subsequently purchased by shoppers. For example, if you’re a cereal brand and manufacture a chocolate-flavoured granola, you better make sure you're not only present in the ‘Cereal’ category, but also the ‘Chocolate Cereal’ and ‘Granola’ subcategories. This is extra important on Tesco where Category is one of the primary search filters.

Read more about how to select the best categories and subcategories for your products.

Tesco SEO: Winning on Search

If you want to rank at the top in Tesco organic search then you have to understand how Tesco’s search algorithm works. Retailers typically keep their search algorithms a highly guarded secret, but we can infer a few things from observation. 

Keywords are always a major ranking factor, but most retailers include other secondary ranking factors in their algorithm such as sales volume, sales velocity, shopper UX data, availability, ratings and reviews, and delivery method. It depends on the sophistication of the retailer. We’ve classed Tesco’s search algorithm into the “intermediate” category - its search functionality is fairly simple, but it has extensive filtering options. Results tend to be based on a keyword match with ranking determined by keyword and category relevance, however this is not always consistent. Tesco does not appear to penalise on being out of stock as “Unavailable” products can be found in search results, sometimes in a high ranking position. 

Retailer search engines explained. Learn more in our UK Grocery eCommerce Overview. 

Tesco search at a glance: 

• Default sort: Relevance
• Search bar suggestions: Related search terms including branded search terms
• Filter options: Category, Brand, Lifestyle & Dietary
• Observations: Inconsistent search functionality. Tesco often includes out of stock items in top results. It also prioritises Tesco’s own brand label. Keyword and category relevance appear to be influential factors.
  
  

Top tips for mastering Tesco SEO: 

• Focus your keyword research on long and short tail keywords. Use the Tesco search bar to research keywords for your products (search bar keyword suggestions are typically a good indicator of popular search phrases). 
• Win the keyword by including relevant keywords in the title and product description (more on this below) 
• Win the category by maximising your category and subcategory presence - make sure you’re located everywhere you should be. You’ll gain extra oomph when your keywords match the category
  
  

Here’s an example in practice: 

In the search for “ice cream”, Walls Soft Scoop Vanilla came up second in organic search after Tesco’s own brand vanilla ice cream. This despite not having “ice cream” in its product title (however it is present in the Ice Cream category and associated subcategories). They’ve amped up their product page with the main keyword “ice cream” as well as plenty of more specific keywords (“vanilla ice cream”, “vanilla flavoured ice cream”, “soft scoop ice cream”, etc). 

Use Tesco’s multiple touchpoints to drive the sale

Don’t forget the myriad ways shoppers can find your product on Tesco beyond organic search and browning by category. Here’s a run-down of all the ways Tesco can show your product to shoppers: 

• Banner ads 
• Promotions 
• Sponsored products
• Suggestions based on your search 

How to create Tesco Product Pages that convert

Getting traffic to your product pages is just half the battle. How do you create outstanding product pages on Tesco that will convince the shopper to add the item to their cart? Tesco’s product pages are inherently very basic. The image dominates the product page (in fact on mobile you have to scroll down past recommended products to find the product description). So you need to be able to sell your product with just a few photos. And then reinforce the sale with great content everywhere. This includes:

• Mobile-optimised images
• Multiple images that show the product, packaging, and ideally the product in practice
• A rich product description, including product-specific features (e.g. “Tasting Notes”)
• A large number of positive reviews

Top tips for maximising search and conversion: 

• Use above the fold content to optimise on conversion through a descriptive optimised title and multiple images. 

Use below the fold content to optimise search driving search visibility through keyword SEO

Tesco vs Amazon

Tesco’s omnichannel strategy driven by customer loyalty has thus far allowed it to maintain its dominance over Amazon. However Amazon increasingly continues to pose a threat, driving both retailers to innovate (for example, the rise in check-out free stores). When it comes to selling online, it’s important to understand the differences between Tesco’s and Amazon’s capabilities so you can optimize your content appropriately. 

Tesco Search Mobile vs Desktop

Most customers shopping on mobile will be doing so through the Tesco app where search results ore much more simplified than on desktop. In both cases, banner images and sponsored products appear at the top, and Clubcard promotions are prominently displayed. Imagery plays an important role in click-throughs so make sure your main product image is compelling and optimised for mobile.

How to Compete with Tesco Private Labels

The pandemic helped usher in a shift to private labels as preferred brands haven’t always been on the shelf, and tighter pockets mean shoppers are looking for value - especially at Tesco where great value is one of its primary USPs. Tesco private labels and its range of exclusive brands is among the most broad and competitive among grocery retailers, with a range of products from basic (Tesco Value) to premium (Tesco Finest). Tesco frequently - but not always - prioritises its own brand label in search. How can you be among the brands ranking above Tesco private labels?

Build stories about your brand that challenge Tesco private labels. People want to know what they’re buying. The challenge with Tesco private labels is that its swathes of loyal customers already know the story, so Tesco doesn’t really have to tell it. So how do you tell your story?

Remember content is everything. Tell your story with great content including images and product descriptions. Tesco’s own brand product pages are often very simple, with one basic image and little content. So you have an opportunity to stand out by creating compelling content that convinces customers why they should choose you.

Use keywords to your advantage. Tesco doesn’t have to optimise on keywords as it will already be prioritising its own brand in its search algorithm. But this doesn’t always mean that Tesco ends up on top (see the “crisps” example below). You have a chance to outrank Tesco by creating more detailed keyword-rich content that not only helps to tell your story, but also target the search terms that shoppers are using on Tesco.

Organic search rank for keyword “crisps”. Tesco’s own brand doesn’t appear until position #12. Other brands have managed to outrank Tesco’s own brand label by optimising their product pages with more keyword-rich and story-driven content.

Measuring Digital Shelf Performance on Tesco

As always with a retailer like Tesco we recommend having a measurement strategy in place so you can easily monitor performance on the key drivers of traffic and conversion. 

• Availability - Are your products in stock? Can you anticipate stock issues at Tesco ahead of peak occasions? 
• Category presence - Are you showing up in the right categories and subcategories on Tesco? 
• Search performance - How many products are appearing in the Top 3 or the Top 10 organic search results? 
• Granular keyword data - Which products are ranking for specific keywords and how high do they rank?
• Content - Do products contain the target keywords in the title and description? 

Want to see the FULL UK Grocery eCommerce Overview?

This e-commerce guide for UK food and beverage brands provides an overview of the online grocery market, covering 8 major retailers and deciphering
their nuances. Discover who, how, and what you can influence for retailer SEO and conversion.