Tesco online food sales have rocketed 49 per cent higher in the last financial year, following extensive IT investment by the UK’s largest supermarket.

In what the company called "another excellent year" for its online food business, Tesco.com profits hit £124 million in the year to 23 February after improved order picking systems led to more efficiency. Sales jumped 36 per cent to £1.6 billion, helped by a successful Christmas run online.

Tesco has invested heavily in IT over the years, and this has played a strong role in improving sales, the supply chain, and efficiency across the company. The company has an in-house designed supply chain application, running on IBM system p servers based on Unix.

In a year where profits rose 11 per cent to £2.8 billion, chief executive Terry Leahy thanked “the breadth of the group and the strength of our business model” for delivering strong results.

The company's online sales grew across all its divisions. Tesco, which serves over two-thirds of the online grocery market, registered its one millionth web customer, a 20 per cent increase on the previous year. Tesco Personal Finance, a joint venture with the Royal Bank of Scotland, also added 20 per cent more online customers, and the company said its deal comparison site, Tesco Compare, was “very successful”.

The company's two-year old warehouse in Croydon, which serves south-east London customers only and is the first dedicated online hub, became profitable this year. The warehouse handles orders with a value of over £1 million per week.

Sales in non-food business Tesco Direct increased to £180 million from a virtual standing start. The business, which is part of the Tesco general merchandise division and has 11,000 items for sale online, had start-up costs and initial operating losses totalling around £25m this year. Tesco said it is aiming to absorb these losses. Launched in 2006, Tesco Direct experienced IT problems that reportedly delayed its opening.

The supermarket giant has 3,000 staff working at its offshore site in India, providing IT and administrative support around the world, including the recently launched US operation Fresh n’ Easy. The Indian site provides software development, as well as accounting and payroll services.

Tesco also has a long running application development dea with Steria-owned outsourcer Xansa, targeted at ensuring its systems are up to date and in line with business needs.

In store, Tesco continued to benefit from thermal imaging technology at checkouts, which speeds up queues and helps the store manage the flow of people and direct them to other tills. The company has a 'one in front' policy, meaning that if more than one customer is in front of anyone at a checkout, it aims to open another till if one is available.

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