Tesco Turns Rapid Delivery Challenge into Competitive Advantage

Tesco's Competitive Edge in Rapid Delivery

By James Davey

Expansion of Whoosh Service

LONDON, Feb 10 (Reuters) - Five years after Tesco boss Ken Murphy warned that rapid-delivery startups could inflict "death by a thousand nibbles" on Britain's major supermarkets, the UK's biggest food retailer has turned the threat into an advantage.

Market Share Goals

Its own fast-delivery service, Whoosh - store-to-door groceries in as little as 20 minutes - is expanding quickly and becoming a meaningful driver of online sales.

Financial Performance and Valuation

During COVID, cities such as London teemed with grocery couriers. The boom then fizzled as losses piled up and capital costs soared, prompting consolidation and exits. Turkey-based Getir bought Gorillas and Weezy but had quit the UK by 2024.

Their retreat gave Tesco room to push deeper into fast fulfilment, leveraging its store network and heavier TV advertising to capture demand.

Traditional rivals have tried the same - Sainsbury's has Chop Chop, Asda promotes Asda Express Delivery and Ocado has Zoom. But none has Tesco's financial muscle.

And with Amazon still testing its own ultra-fast service, the opportunity has become another way for Tesco to widen its lead in Britain's fiercely competitive 250-billion-pound ($341-billion) grocery market.

RAPID DELIVERY NOW A STRENGTH

Whoosh operates from 1,600 Tesco stores, including 180 large outlets, reaching more than 70% of UK households. Tesco staff pick and pack orders, while partners - Uber Eats, Just Eat Go and Stuart - deliver.

"We have been able to grow the service quickly using our existing stores and seamlessly integrate Whoosh into our overall offering," Tesco online director Rob Graham told Reuters. He said Tesco recently added the option to schedule a Whoosh order.

"We have seen growth in the number of items customers are buying and the number of times they use Whoosh, and our customer satisfaction scores are growing at the same time."

Whoosh sales rose 47% year-on-year over the 19 weeks to January 3, gaining more than 250,000 new customers. Tesco's total online sales rose 11.2% in the period. It has about 37% of the UK online grocery market.

The Institute of Grocery Distribution estimates the UK quick-commerce market was worth 2.4 billion pounds in 2025 and forecasts a 10.1% compound annual growth rate through to 2030, lifting its share of online grocery deliveries from 9.1% to 11.9%.

Whoosh's growth highlights Tesco's ability to adapt to market shifts. Its research shows most Whoosh purchases are incremental to in-store shopping.

Not all of its bets have come off, though, with moves into banking and financial services later scaled back.

LOOKS TO REGAIN 30% SHARE

Tesco's UK grocery market share peaked at 31.6% in December 2007, before German discounters Aldi and Lidl shook up the market and forced sharper price competition.

Its share stood at 28.7% in January, up 20 basis points year-on-year, according to Worldpanel by Numerator.

Tesco has told suppliers it aims to regain a 30% share, and major investors say the goal - last hit in 2013 - is plausible.

"It's conceivable over a number of years to get there by just doing what they have done," said Kunal Kothari, UK equity portfolio manager at Aviva Investors, a top-20 Tesco shareholder.

"There's no reason why they cannot continue to grow share at 20, 30 basis points a year."

TESCO'S VALUATION DISCOUNT

Even after a 16% rise year-on-year, Tesco shares still trade at a steep discount to global peers. Walmart trades on more than 40 times forward earnings versus Tesco's roughly 15 times.

"There's a bit more of an appreciation in the U.S. for these businesses," said Julian Bishop, co-lead portfolio manager of Tesco investor the Brunner Investment Trust.

"We think Tesco have about 50% of all the profit in the UK grocery market. They're in a very strong position, in control of the market."

Ben Preston, fund manager at Orbis Investments, another top-20 investor, sees little risk of a damaging price war, noting rivals Asda and Morrisons remain highly leveraged.

"The bigger concern is they just lose focus, lose their execution edge and somehow allow competitors back into the game," he said.

But having entered 2026 with momentum, Tesco is determined to stay sharp. Murphy's mantra remains: "Don't get too cocky."

($1 = 0.7332 pounds)

(Reporting by James Davey. Editing by Mark Potter)