Tesco is to shut its loss-making digital arm, which sells general goods like toys and clothing, as the firm concedes defeat to rivals including American retail giant Amazon.

The supermarket said that after carrying out a review of its non-food website, Tesco Direct, the operation will cease trading on July 9.

Online grocery orders will not be affected by the move and Tesco.com will continue to operate, adding some of the items Tesco Direct sold to its ranges.

As part of the move, the firm intends to close a fulfilment centre at Fenny Lock which handles Tesco Direct orders.

Tesco cited a number of “significant challenges”, including high costs for fulfilment and online marketing, which have prevented it from delivering a “sustainable offer as a standalone non-food business”.

The news came on the same day as Marks and Spencer confirmed up to 100 store closures across Britain.

An immediate impact on customers is expected, with the Tesco Direct website saying the firm will no longer offer next-day delivery.

“From 22 May, we won’t be able to offer next-day delivery. Instead, orders will take 2-5 days to arrive – and the same applies to Click+Collect orders,” the site said.

Tesco executives hinted the move would allow the firm to re-focus on its food businesses, which has struggled to fend off the challenge from German discounters Aldi and Lidl. 

Charles Wilson, Tesco’s UK and Ireland boss, said: “We want to offer our customers the ability to buy groceries and non-food products in one place and that’s why we are focusing our investment into one online platform.

“This decision has been a very difficult one to make, but it is an essential step towards establishing a more sustainable non-food offer and growing our business for the future.”

Trade unions said the announcement was “devastating” for affected staff.

Joanne McGuinness, national officer of shopworkers’ union Usdaw, said: “This is devastating news for Tesco Direct staff. Usdaw officials and senior reps will now enter into consultation talks with the company where we will look closely at the business case for the proposed closure.

“Our priorities will be to support, advise and represent our members through this difficult period, and to get the best possible deal for them.”

One expert said the demise of Tesco Direct proved it is not just physical stores struggling in the changing marketplace.

Martin Lane, Managing Editor of money.co.uk said: “Yet another retailer has succumb to the pressure of retail giant Amazon.

“Tesco Direct shutting… suggests not even key players are safe in the current climate – it’s not just the high street suffering.”