September 27, 2013 1:49 pm

Tesco hopes Hudl tablet will soothe its ills

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As Philip Clarke, chief executive of Tesco, took to the stage to launch its low-cost tablet in a trendy tech hub in east London this week, he hoped to catapult Tesco into the digital age and demonstrate how Britain’s biggest retailer was changing.

“What we are launching today is pretty special,” he said.

Just days later, the grim reality for Tesco was underlined as industry data showed that it was the slowest growing of the so-called big four supermarkets.

Barclays, its newly appointed broker, cut its forecast of full-year trading profit by 2 per cent, while former broker JPMorgan said Tesco was at risk of having to issue a profit warning. The challenges that Tesco faces at home and abroad will be laid bare when it unveils its interim results on Wednesday.

At the launch of the Hudl, Mr Clarke trumpeted its role in making tablet technology accessible to the three-quarters of Britons who do not own a tablet. The technology was “for the many not, not for the few”, he said.

But for Tesco itself, much is riding on the Hudl. Retail has undergone a seismic shift over the past few years, driven by the shift to online shopping and rising tablet and smartphone use.

Mr Clarke has put reinventing Tesco for the digital age at the heart of his strategy. “The whole organisation is re-architecting itself around a combination of stores and the internet in a seamless way,” he told the Financial Times.

Two years ago, as Mr Clarke announced Tesco’s first profit warning in 20 years, he set out plans to move away from building big stores to focus on online shopping and convenience stores.

Among digital steps, as well as having its shopping websites, it has developed an online market place where other brands can sell via the Tesco website. Two years ago it acquired Blinkbox, a film and television streaming service. This was followed by digital music platform We7 and Mobcast, the digital bookstore founded by SAS soldier turned best-selling author Andy McNab. Both have been rebranded as Blinkbox services.

The Hudl will have a Tesco launcher button, taking users straight to Tesco’s online services, including online shopping, digital access to its Clubcard loyalty scheme, Tesco bank, Blinkbox and Clubcard TV, which offers free films and TV to Clubcard holders.

“You are only ever a fingertip away from Tesco, whatever you are doing on your tablet,” said Mr Clarke.

But Tesco faces a broader challenge – to win back the hearts of consumers, faced with a barrage of shopping choices and disillusioned by events such as the horsemeat scandal.

Tesco believes that in a world where individuals have a relationship with brands through technology, it will be able to re-engage with them through the Hudl.

By providing an “immersive” experience to customers “you are starting to allow them to get closer to you”, said Mr Clarke.

Reading, watching movies and listening to music make you happy. Let’s bring a bit of happiness into people’s lives, and do it in a cost-effective way. That is what the brand has to do, that reconnection

- Philip Clarke, Tesco chief executive

“Reading, watching movies and listening to music make you happy. Let’s bring a bit of happiness into people’s lives, and do it in a cost-effective way. That is what the brand has to do, that reconnection,” he said.

Tesco will not glean data from customers using the Hudl in any way. But it hopes the device will reinforce its relationship with its most loyal customers.

Indeed, the 16m Clubcard holders will be able to double their reward vouchers to purchase a Hudl, potentially being able to buy it for £60.

Nor will the Hudl be a loss leader. Mike McNamara, chief information officer at Tesco, said the Hudl had been pitched at a “price and a specification that is good for [the customer] and make money for us”.

Some long-term Tesco watchers believe the tablet move could be the right one.

“Is it going to be the next big thing? Probably not. Is it worth having a go? Well it may be,” said retail analyst Philip Dorgan.

But according to Clive Black, analyst at Shore Capital, the Hudl is “not expected to single-handedly move the revenue or profit dial any time soon, or ever”.

Critics say it is a distraction from the core business, pointing to problems at Tesco Bank and the failed foray into the US, with the disposal of its Fresh & Easy business.

“This is the core business,” said Mr Clarke of the Hudl.

Nevertheless, the challenges in other parts of the Tesco empire will be thrown into sharp relief next week.

Sales from British stores open at least a year are expected to be flat to slightly down, an improvement on the previous quarter. But there is concern that Tesco will have to invest more money in the UK to defend itself against the might of the so-called hard discounters, such as Aldi.

“The market is going into this set of results, rightly or wrongly, concerned about the robustness of Tesco’s profit guidance,” said Mr Black.

As Mr Clarke fights fires at home and abroad, some Tesco followers wonder whether launching the Hudl is the right tablet for the retailer’s ills.

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