Tesco is gearing up for battle with U.S. online shopping giant, Amazon.
It’s hard to believe but Tesco has fallen on hard times of late, and has lost some of its air of invincibility. So it’s rolled its sleeves up and is preparing to take on Amazon on its own terms with the launch of string of online entertainment stores with the ultimate intention of making Tesco the world’s biggest multi-channel retailer.
In order to achieve that the supermarket giant is preparing to launch two specialist ebook and music retail websites later this year, alongside the Blinkbox online movie store which it already owns.
Gavin Sathianathan, Facebook’s head of retail for Europe, the Middle East and Africa, will lead the books operation, Blinkboxbooks, whilst Mark Bennett, a former EMI and Warner Music executive and currently head of Sainsbury’s digital entertainment unit, will head up Blinkboxmusic.
Tesco bought an 80p percent stake in the Blinkbox film and TV site in 2011.
Industry experts saw the move as defensive, claiming that it was simply negative manoeuvre to thwart the likes of Apple and Amazon whose own movie services were rapidly eating into Tesco’s share of the entertainment market. Blinkbox customers can buy or rent new movies by downloading them over the internet, in a similar way to movie rental services like Netflix or Amazon’s Lovefilm. However, what makes Blinkbox different is that its sales model allows it to offer recent box office hits, like Skyfall, much earlier than its rivals. It can even deliver these services quicker than pay-TV operations like BSkyB.
Unfortunately Tesco appears to have done little with the East London-based technology firm in the two years it has owned it, but it now appears that things are about to change.
The three Blinkbox retail sites will sit separately from Tesco’s main online retail store and will only carry the discreet Tesco branding. However, the supermarket will advertise and promote the sites heavily in its stores and use these promotions to ensure that customers in search of specialist online book, music, film and TV box sets sites continue buying from the Tesco empire instead of drifting away and buying their entertainment products elsewhere. It will also target the millions of customers who still haven’t started shopping online in any meaningful way. By doing that, Tesco hopes to stop the steady and relentless drift of customers going to Amazon for just one sort of item, only to turn to back to Tesco for a large range of online household goods. For Tesco this is becoming a difficult problem, as its U.S. experience has shown that that drift can soon turn into a march. Many U.S. customers now regularly buy ordinary items like nappies and cleaning products from Amazon, as well as luxury items like books and electrical goods.
Amazon far outranks Tesco in online sales, yet Tesco’s chief executive Phil Clarke still has ambitions for Tesco to become the world’s biggest multi-channel retailer. Michael Comish, chief executive and founder of Blinkbox, said:
“Tesco is already the third largest retailer in the world, and we will have launched three new digital entertainment businesses by the end of the year, headed by some of Britain’s brightest digital minds. This is the beginning of a big journey.”
“I don’t think you compete head on against Amazon. I think you compete around Amazon and leverage the strengths you have… Amazon doesn’t have 2,000 stores. Amazon doesn’t deliver to within the hour. There’s a lot which Tesco has which customers value.”
News of Tesco’s online expansion plans come as the supermarket prepares to launch a Clubcard TV channel, underpinned by Blinkbox’s technology.
The new television station will be available to members of Tesco’s ClubCard loyalty scheme, free of charge, and will offer a mix of archive films and television shows. Initially it will only be available over the internet, but Tesco is in discussions with satellite and cable broadcasters about turning it into a mainstream television channel. The supermarket will use detailed information about viewers, collected through its ClubCard scheme, to serve up carefully tailored adverts to users and household.