UK supermarket giant Tesco to take on Amazon by offering free delivery for loyalty scheme members

• Tesco, the UK's largest grocery retailer, will offer free delivery for millions of customers, CEO Dave Lewis told the Sunday Telegraph. The move mirrors Amazon's July expansion of Amazon Fresh.
• The British retailer plans to scrap its basic fee of £4.50 ($5.89) on online deliveries for members of its loyalty scheme, Clubcard Plus.
• The scheme puts Tesco in direct competition with Amazon, which in July began offering free home grocery deliveries to Prime members through Amazon Fresh.

British supermarket chain Tesco is preparing to take on Amazon by offering free home delivery to millions of customers.

The grocer has so far been charging £4.50 ($5.89) for online delivery slots, but it now plans to scrap the fee for the millions subscribed to its Clubcard Plus loyalty program, CEO Dave Lewis told the Sunday Telegraph.

It follows Amazon's decision last month to offer free grocery deliveries to Amazon Prime customers in certain parts of the UK.

CEO Dave Lewis told the Sunday Telegraph: "I understand the move [from Amazon]. The idea of Prime is very similar to where we are in Clubcard Plus, in terms of bringing a whole bunch of benefits together. So an opportunity into the future for us is to think about how we put delivery into Clubcard Plus. That's always been the direction of travel."

The rollout would not be immediate: Tesco has to "make sure that we can match capacity with that [online] demand" before it introduces the free service, he said.

Tesco's loyalty program, launched in November last year, costs £7 a month and gives members a 10% discount in two stores, up to £20 per shop.

Clubcard's perks have been compared with Amazon Prime, for which members pay £79 ($104) a year for benefits such as express package delivery and online TV streaming.

Tesco increased its online delivery slots from slightly over 600,000 a week to 1.4 million after consumers transitioned to online shopping during the lockdown. It added more than 200 new vans, and recruited more than 2,500 and 5,000 pickers, a spokesperson said in an email to Business Insider.

Sainsbury's, another major UK grocer, nearly doubled the number of online slots available during the pandemic.

Amazon rolled out free deliveries — from dairy products and baked goods, to fresh meat and fish, fruit, and vegetables — to UK Prime members last month through Amazon Fresh. The service is set to expand to more UK cities by the end of the year.