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Monday, September 20, 1999 Published at 06:27 GMT 07:27 UK

Business: The Company File

Internet shopping explosion

Tesco is adding virtual stores to its familiar supermarkets

The UK's biggest supermarket chain, Tesco, is launching an online retail outlet in direct competition with and WH Smith, selling books, CDs and videos - with plans to expand later into electrical goods and even cars.

The BBC's Sarah Boxhall reports on consumers increasingly seeking out bargains
Virgin is also launching a service linking consumers with a global network of wholesalers and manufacturers.

And Egg, the direct banking arm of Prudential, is launching the UK's first Internet credit card, with competitive rates and a cashback offer.

Tesco's chief executive, Terry Leahy, is quoted in the Sunday Times as saying: "We will be the world's biggest online grocery retailer and we intend to become the UK's No.1 e-commerce business."

[ image: Wal-Mart's acquisition of Asda has sparked price wars]
Wal-Mart's acquisition of Asda has sparked price wars
The company is also developing online financial services to complement its exisiting banking business.

The expansion by Tesco is being seen as part of a strategic response to the threat posed by US retail giant Wal-Mart's acquisition of Asda.

The BBC's Cellan Jones: "Asda's promise to reduce prices has certainly ruffled feathers"
Both Tesco and Asda have announced a round of price cuts, which Tesco has described as the "biggest Britain has ever seen", while Asda says it is ready to slash its prices by up to 10% to bring them into line with Wal-Mart's.

Virgin's new business - - aims to be selling a huge range of goods at big discounts by early next year. It says it will guarantee its prices undercut existing retail giants by, on average, about 15%.

Egg credit card

Egg is also launching an Internet shopping site with links to a number of retail brands to encourage Egg customers to start using their new credit card straight away.

The card offers a 1% cashback on all standard High Street purchases and up to 2% cashback, along with regular special deals, on Internet buys.

It can be used at any Visa cashpoint to withdraw money, but the group will charge non-Egg account-holders for this service. It has no annual fee and Egg is guaranteeing its customers money-back protection against fraud.

The card gives a standard rate of 9.9% APR, with customers who transfer their credit balance to Egg getting a rate of 4.5% APR on the money for six months. Other cashback cards typically charge 17% APR.

Egg says it is not setting a target number of customers, but hopes to cash in on the 3.4m online shoppers in the UK, which it expects to rise by at least another 2m in the next six months.

The company would not reveal how much the service cost to set up but claims it will be profitable a year after launch. Competitors are said to be sceptical.

Egg said its research had found that one in ten British people were ready to buy online, but 60% of Internet users said they were worried about fraud, even though less than 1% had experienced any type of deception.

The study also found that Web shoppers list convenience (47%), price (27%) and speed (11%) as the main benefits of buying online.

Mike Harris, chief executive of Egg, says he expects the card and shopping site to be one of the catalysts for a boom in British online shopping in the approaching Christmas season.

"In America, it [online shopping] shook everybody last Christmas and we think it will take off this Christmas in the UK."

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