Tesco has made its intent to lead the way in multichannel clear with strong growth in online grocery and a roll out of drive thru click-and-collect. Retail Week takes a look at Tesco’s multichannel development in its latest results release.
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One of the biggest advantages Tesco has developed over the past couple of years is its ability to try new things without fear of failure – something few have managed.
The strategy has led to a stream of interesting ideas coming from the retailer. The Hudl tablet, launched on Monday, has been attracting headlines with an affordable £119 price tag but it is more than just an interesting new product for Tesco.
It is the first time a traditional retailer has positioned itself as a digital media company, with own-brand hardware at the centre of a self-created digital ecosystem. The only other retailers to take this route have been Amazon and Apple but with Tesco’s wide range of products, loyalty data and stores at its disposal, its potential scope is in some ways much greater, if it can develop enough scale.
Tesco said of the device in its first half results statement: “Hudl is tailored around customer needs and ease of use with instant access to our full range of digital services, all in one place - these include Blinkbox movies and music, Clubcard TV, banking and of course shopping for groceries, clothing and general merchandise, as well as other popular pre-loaded apps such as YouTube, Google Maps and Google Play.”
Hudl is not the only innovation to come from the grocer – drive-thru click-and-collect and Scan as you Shop services have both made their mark.
There are now nearly 200 click-and-collect drive-thru collection points and an additional 40,000 UK customers have signed up to Tesco’s Delivery Saver subscription schemes in the first half. Scan as you Shop has also done well – over 300,000 customers use it each week, and for stores where it has been introduced more than 20% of sales are made through the technology.
But linking up legacy systems at one of the world’s biggest companies is a huge challenge, and one that Tesco no doubt struggles with as much as any retailer.
There are few mentions in its latest results release of the scale of the behind-the-scenes work required – just an acknowledgement that the work is on-going: “We have continued to invest in improving the integration of our customer offer across all of our store formats and channels,” it said.
But the supermarket is clearly confident it will continue to lead the way. Its report said: “As the retail industry evolves and we deliver our objective of being the leading multichannel retailer, strengths such as our IT capability, own-brand expertise and ability to transfer management skills across the group will become even more important competitive advantages.”
The grocer’s multichannel efforts aren’t limited to the UK either – it now offers online grocery in over 50 cities across nine markets outside the UK, and online sales were up 13% in the UK and 54% overseas.
It added growth has been strong in the key Central Europe region: “Our service is already available in more than 30 major cities across the region and our progress will continue through the year, not least with the launch of grocery home shopping in Turkey early in 2014.”
The grocer will also open its sixth dotcom-only store, in Erith, later in October to support growing demand for grocery home shopping in Greater London. “Our Erith facility will build on the learnings from our openings to date, with an increased level of automation and, as a result, a greater capacity in terms of the volume and number of orders.” Tesco now holds a 47.3% share of the online grocery market, according to Kantar Worldpanel data for the 12 weeks to September 15 and the channel grew at 15% over the quarter.
However, beyond online grocery, Tesco has enjoyed a tougher time in etail. Despite forming a “key part” of its multichannel strategy, sales at online non-food site Tesco Direct fell as it overhauled the range of its in-store general merchandise. On marketplace Sellers at Tesco, meanwhile, third parties have now uploaded more than 200,000 products since the year-end as Tesco attempts to put the channel’s sluggish growth behind him.
Under the stewardship of multichannel boss Robin Terrell, poached from House of Fraser in January, Tesco appears set continue to dominate in multichannel grocery.
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