Boom at last for Web business?

Allan Leighton: "A year on the Web equals 10 in other parts of the business world"

By CNN's Graham Jones

LONDON, England -- Tesco's deal to take over 35 percent of the Web business of U.S. supermarket chain Safeway Inc and the big profits at Ireland's budget carrier Ryanair raise an intriguing question.

UK number one grocer Tesco's online shopping service now has a million registered customers in Britain, receives about 70,000 Internet orders a week, and posted annual sales last year of £300 million.

Ryanair's profits soared 44 percent to $90 million on the back of 92 percent of ticket sales being on the Web -- helping the firm significantly cut costs.

So with these firms doing so well from their use of cyber-space, is the boom coming at last into Web business?

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One man with a clear view of the do's and don'ts is Allan Leighton, former CEO of Asda and Wal-Mart Europe. He took over last October as non-executive chairman of then troubled UK former dotcom darling, lastminute.com.

He says it isn't e-commerce as a whole which is doing well -- but the strong brands in the market place.

"Boom? I doubt it," he told CNN. "You can't look at e-commerce as a whole and say things are getting better. There are sections doing well and there are companies doing well.

"Tesco and Ryanair are pretty established as anyone. They are very good brands based on very good ideas."

Leighton says the secret for a Web business is to create something unique and compelling -- as lastminute.com themselves have done. "If you can then you stand a chance. If you can't then you don't."

He says in percentage terms, it's like all businesses -- "25 percent do well, 25 percent are OK, and the other 50 percent don't do too well. If you look back over the last 12 months that's what you'll see.

"Though one year in a Web business is like 10 years in any other. Things change so quickly."

Tesco.com now has a turnover of £6 million a week, is four times as big as Amazon.co.uk, and was recently named by Datamonitor as global leader in online grocery sales.

Tesco itself puts a lot of its cyber-success down to timing -- being early into the market and gaining the experience.

"We began in 1995 looking at models and what would best suit the scale of the market at that time." says spokesman Russell Craig.

Rather than by going for massive warehouses needing a lot of customers over a wide area making huge orders, Tesco went for a local store-based option -- something it will take with it to the U.S. in its partnership with GroceryWorks.

This works on a small customer base and a small distribution area and does not rely on big individual orders. It also doesn't make the key -- and oft-repeated -- mistake of making unrealistic predictions about growth.

"It's a small market," says Craig. "By 1997 when others were joining the market our experience had paid off.

"We'd had two years from 1995 to learn our lessons. The 1997 model is what we use today."