Tesco China announced on Wednesday that it will enter the e-commerce field with its business starting in Shanghai, yicai.com reported.

The retailer's e-commerce mainly will cover food, vegetables, fruits and daily use articles, and it will use its own logistics system. To reduce costs at the beginning of the transition, Tesco China's distribution will only cover the inner rings of Shanghai. All the goods will be delivered by its physical retail stores in the city.

Influenced by the expansion of e-commerce and the rise in rents, the physical retail stores' business is seeing less revenue than before. Tesco China has closed several stores in recent years.

Before Tesco China's move, Wal-Mart China, Carrefour China and Shanghai-based NGS Supermarket had already started their e-commerce operations. Wal-Mart China purchased yihaodian, a Chinese online supermarket, while the other two set up their own e-commerce systems.

According to insiders, to set up a new e-commerce system, the physical retail stores will have to face challenges coming from huge investment, commodity differentiation and logistics costs, among which logistics costs are the hardest to control.

Tesco China says that the retailer's transition to e-commerce has long been discussed inside the company and the online shopping trend was inevitable.

Tesco PLC, the world's third-largest retailer by revenue, started e-commerce operations in 1997 in Britain. The retailer's online sales revenue reached 3 billion pounds (28.8 billion yuan) in 2012, a 13% year-on-year growth.

Before its e-business trial in China, Tesco opened online shopping platforms in nine countries in Europe and Asia.