The giant awakes

Having signed a significant deal with SoftWide last month, Tesco has been transformed from a bit-player in the software market to a serious contender, with a thousand lines under its belt. The deal looks set provide a powerful boost to its entertainment division, as well as the technology and electricals side of the business – both of which have seen significant rises in recent months anyway. Andrew Wooden finds out more from Rob Salter, category director for entertainment at Tesco…

You’ve integrated the SoftWide system into your online operation, dramatically increasing how many lines of software you stock. Are there any plans to roll it out physically into stores?

Not at the moment, but we haven’t discounted it. We want to see what happens with the online proposition to test it out from a technology standpoint. We have it set up in our distribution centre, so when we receive an order online, we’re sending them out from that facility. In this case we’ll make them to order with the SoftWide technology –we want to see it working as a business in that format before we would consider investing in it as a store proposition.

Now that’s not to say it won’t happen. I’ve talked to SoftWide about trialling it in a store at some point in the future, but we have no specific plans to do so at this point. How many titles do you now sell exactly, and how many can you increase that to now you have the SoftWide system?

There are no real limiting factors to it, providing you’ve got the content itself and the meta-data to be able to show it to customers on the site; it really doesn’t matter too much whether it’s one thousand or ten thousand. As long as you can display the choice to the
customer, the broader the choice, the better.

Do you think this gives you the required punching power to better compete with the likes of DSGi and Amazon in the market?

Increasingly it is about range and breadth, and delivering the widest possible choice for customers, delivered in away that is economical. So if we were to physically stock thousands of titles there are quite significant costs in doing so. This technology obviously gives you the opportunity to open up a range where you’re only creating physical products at the point where you’ve got an actual order. There’s no real limitation on that.

Is there a particular area of software you’ve concentrated on, or is it totally across the board?

We’ve pretty much taken the SoftWide offer as it stands. We’ve incorporated the products that they have managed to licence and launched them on the site. The next phase is to start looking more closely at the range, and also look at how we can broaden that range in terms of the delivery mechanism to a broader set of categories. So we could, for example, offer deeper catalogue on some movie content – i.e. things that we wouldn’t stock physically because demand wasn’t large enough to warrant it. But we could stock a range through SoftWide, provided we could get the content owners to a level of satisfaction with the physical SKU, whereby they would say ‘yes, we’d be more than happy for our brand to be represented in that way, and we’re happy for you to send that to customers in that format’.

So we are going to talk to film studios, for example, about whether or not we can bring an extended offer for something we wouldn’t normally buy from them, provided we can create a satisfactory SKU that they would be happy with.

How does this tie in with your overall technology category strategy? It seems to signify that you’re getting more serious in the area…

It’s quite clear from our development in our electricals business and what we’ve done there, that we have been serious about this for quite some time. It’s increasingly big business for us.

The criticisms of such a broad retailer like Tesco selling PCs and software is that it requires much more bespoke staff knowledge than other categories – almost a personal shopper experience. How would you respond to that?

We’ve absolutely recognised that now, and increasingly in the future customers are going to want more help and more personal service in areas of technology. And that is getting quite tricky as things develop very fast with new technology coming on to the market, and customers require a good deal of help and support to make the most of those technologies. And that’s why Tesco has increased its tech team.

So in our big stores where we have significant electricals and technology areas, there is a specialist in every one who can help customers in exactly that way. We’ve invested heavily in training and hiring staff who are able to give that type of support directly to customers, both in the stores and we also have technical support available to customers online and over the phone.

Tesco does have a lot of brand trust with the mass market – do you think that helps with technology sales, in situations where customers may be intimidated by the ‘techy’ atmosphere of specialists and independents?

I think so, and it’s our job to make sure the things we do and the things we support are worthy of that trust. So we’re very careful to make sure that the things that we sell are what we can associate our brand with and customers are able to trust in. Absolutely, I think a lot of customers are possibly intimidated by some of those environments, and it’s absolutely on pitch for us to provide that service if customers feel that way.

It’s an interesting time for the technology market, with new categories like tablets and 3D looking to inject new life into the industry. Do you have any plans for these emerging markets?

Absolutely. We are keeping up to speed with everything that’s going on in the technology world, and we’re also listening to customers. Tesco is very much a customer driven business and we listen to them and attempt to give them what they’re asking for. So it is our job to make sure the thing that customers want to buy are available.

We want to bring it to them safely and in a way that they will enjoy. The market is moving at a pace now where the process of a technology going from a high price early adopter market to mass market is seriously narrowing and narrowing. You almost have to ignore that and think about mass market from day one, whereas there used to be a long gap. And the price of some of these new technologies is getting keener all the time. I saw a 3D TV set a couple of years ago which was £8,000. That same piece of equipment is probably around £1,000 now.

How are video game sales going? Are you looking to move into this area more in the
future?

Yes – interestingly, the last year was tough for the market in that we’ve reached a degree of format maturity with the Xbox and PS3. The current hardware formats are now into their third and fourth years, so we’ve seen the big growth in hardware purchasing happen.

While it’s been a tougher environment to sell software, we have doubled our market share in the last 12 months in software and hardware. So while the market has been relatively flat, or slightly contacted, we’ve grown very well in that marketplace. In fact, we’ve doubled our market share in both hardware and games. And we’ve invested quite heavily in resources – we’ve got a new team together, we’ve got more space, and we are moving into pre-owned games this year. A lot of it is investment in people, and we are working that market this year.