The battle for the online pound is on. This week, Asda disclosed details of its online rollout, first revealed in The Grocer in September, just days after Tesco announced plans to launch an online clothing trial parallel to its non food site, Tesco Direct, which went live in September. Not to be left out, Sainsbury's unveiled the latest plank of its online strategy with the roll out of its service to its Northern Irish stores.

All three are clearly eyeing the online Christmas cake. No wonder. Web sales are expected to soar 40% over the festive period to £7bn, according to the Interactive Media in Retail Group. A good slice of this will be grocery related.

The growth prospects beyond Christmas don't look bad either, according to IGD: the market, which currently stands at £1.6bn is expected to almost double in size to £3bn by 2011.

But what is really interesting is the play for the non food pound signalled by Tesco's move. Though its clothing site is unlikely to be up and running by Christmas, Tesco Direct already is - and the festive period will be its first big test. The site, which boasts 8,000 products, some of which are only available online, clearly has Argos and John Lewis in its sights as much as rival supermarkets.

"Tesco is really aggressively going after non food and stealing a march on the competition," says Alastair Lockhart, senior retail analyst at Verdict. "Tesco Direct allows it to enter new categories it's not really entered before, such as furniture, for instance."

The real killer as far as the competition goes is the promise of two hour delivery slots compared with the usual day slots offered by the high street. "It doesn't need to take too much of the market to see other players collapse," adds James Roper, IMRG's chief executive.

Tesco is building on an already strong online proposition. Not only is it thought to have hit £1bn in internet sales this financial year, it is also making a profit. If it can make online clothing work, it will be a real coup, says Shore Capital analyst, Clive Black: "No-one has really cracked clothing on the web."

But it is not the only one gunning for a bigger share of the online non food market. While Marks & Spencer has no plans to expand its online grocery offer beyond wine and party planning, it is working with Amazon to reconfigure its non food platform, which will go live next spring.

E-tail is currently worth "just north of £100m" to M&S, said chief executive Stuart Rose at the interim results. "A target of £250m within a couple of years is perfectly achievable."

So why isn't Asda, with its obvious strengths in general merchandise, going for non food as well? Though it will have rolled out its online business to its entire customer base by next October, the main focus will be grocery, says CEO Andy Bond, who declared last weekend that "the greater commercial opportunity" is in Asda Living rather than "general merchandise dotcom".

Some experts argue Asda is sensible to try and get its grocery house in order first. But others feel it is missing an opportunity to leverage strong non food brands such as George and Living, perhaps with bespoke sites. "It keeps getting it wrong," says Roper. "It doesn't seem to have a vision for the internet customer."

Others think it is only a matter of time. "It's interesting they've chosen to expand food rather than non food because from Asda's point of view, non food is its strength and where the concentration of Tesco's online strategy is coming from," says Lockhart. "I don't think Asda's customer base - lower demographic groups - is going to be as prolific in spending as Tesco's but there needs to be more non food. The real growth is in non food. I don't think it is too late but it definitely has a long way to go to catch up. It is way behind."

So where does this leave Sainsbury's, Morrisons and Ocado? Some argue Sainsbury's is right to stick to grocery. Others feel, like Asda, it is letting Tesco dictate terms, which could prove costly in the long term, especially if the latter is allowed to corner non food in areas such as clothing.

Meanwhile, Morrisons' lack of online presence could put it at even more of a disadvantage as everyone else ramps up their offer.

Ocado, however, is expected to turn the corner having posted its first operational profit.

Christmas will be critical in the online war. Looking ahead, the question is not so much whether Tesco's rivals can catch up as whether they can stay in touch now it has taken the battle to the next level with non food?the online four


The retailer is hiring 1,800 staff to support its expansion. Its service is currently available to just under half its customers, but it hopes to have rolled it out to its whole customer base by October 2007, covering 80% of the market.

Tesco covers 95% of the market. Copying Ocado's model, in February it opened a "shopperless" store in Croydon to service customers in south London. Its non food site and catalogue, Tesco Direct, went live in September. Plans to sell clothes on the net were revealed last week.


Sainsbury's now covers more than 80% of the country from 109 stores. It has just launched in Northern Ireland and claims to be the only online grocery retailer in the region to offer one hour delivery slots, entitling customers to £10 off if a delivery is late.


Ocado, which offers one hour delivery slots, operates a warehouse rather than a store based model - a strategy being copied by its rivals. Despite its pre-tax loss widening from £41m to £45m last year, operating profit increased and growth is expected.