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Tesco Online Services

“One stop shop.” While many supermarkets today confidently market themselves under this

three-word phrase, the continuous development of online retailing and marketing capabilities

make it harder to define. Providing a wide array of in-store services has been an integral aspect

of supermarket retail in the past, yet the majority of grocers have been slow to add online

services to their portfolio. However, in the UK, with 76% internet penetration and the average

user spending 22 hours online per month in 2010, many of the top supermarkets are beginning

to differentiate themselves by expanding their online presence. Now, top UK grocers like Tesco

are shifting away from traditional merchandising and engaging with increasingly tech-savvy

customers through a diverse range of online services to engage and contain shoppers. In this

article, we explore how Tesco has approached this largely unexplored frontier of online

services.

Key Points to Consider

Tesco.TV and Tesco Magazine developing as Tesco customized media outlets

Tesco communities engage with specific demographics

Tesco RealFood brings ingredients to life

Tesco covers all the bases before expanding its services range

Highly integrated club card program brings all the moving parts together

Tesco’s homepage

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Tesco.com Developing as a Customized Media Outlet

Still somewhat in the trial phase, Tesco.TV is poised to be a strong point of interaction between

Tesco and its customers. This new media outlet currently contains new Tesco commercials,

“how to” videos, short peeks into Tesco’s product sourcing, and videos showcasing Tesco’s

F&F Couture apparel – available exclusively online.

Tesco.TV is an outlet for company-produced videos related to anything from Tesco’s newest mobile app to

how to decorate cupcakes

In most aspects, Tesco Magazine is a traditional lifestyle magazine, covering top of mind topics

from Fashion & Beauty to Travel, geared towards Tesco’s female shopper base. While not

transactional, articles generally attempt to showcase how Tesco products can be used, and

often reference specific products within the article itself.

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At first glance, Tesco Magazine looks to be similar to any traditional lifestyle magazine geared towards

Tesco’s average female shopper

Many articles attempt to market Tesco products to readers with a link to Tesco’s e-commerce ready site

located conveniently on the side

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Tesco Communities Engage With Specific Demographics

Tesco communities, such as its Baby & Toddler Club and Greener Living community, target

core, marketable demographics. Each community provides a space for the retailer to engage

with its customers and a place for customers to interact with each other. The network effect that

builds as more shoppers join and participate in these communities ultimately drives customer

loyalty.

Tesco’s Baby & Toddler Club is a community where new and expecting mothers can look for advice, learn

from each other, and buy “mum recommended” products through Tesco.com

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Tesco Greener Living, targeted at eco-friendly shoppers, showcases how to “go green” using Tesco

products

Tesco RealFood Brings Ingredients to Life

Tesco RealFood represents Tesco’s core community of female shoppers and provides them a

simple, unified platform to plan meals, share recipes, and buy ingredients. The search function

makes the site highly customizable by food type, meal occasion, number of people eating, and

budget. The community aspect brings the site to life by allowing users to rate and comment on

each other’s recipes.

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Tesco RealFood is a live community where customers can plan meals, browse, post, and discuss recipes

and cooking tips.

Each recipe includes the convenient option to purchase the required ingredients through Tesco.com

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Tesco covers all the bases before expanding its services range

Although Tesco is innovating new online services, it has made sure to first bring its basic in-

store services online. Any services available within Tesco stores, from Tesco Opticians to its

Photo Centre, are available online.

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All Tesco’s basic in-store services are present online as well

Highly integrated club card program brings all the moving parts together

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Tesco integrates its Club Card program in nearly all aspects of its business

Tesco’s Club Card ties the otherwise separate business modules together into a single

integrated network. Club Card points are collectable and redeemable in virtually all aspects of

Tesco’s business - providing customers with incentive to turn Tesco into their “one stop shop.”

Conclusions & Implicaitons to Retailers and Suppliers

It is common for retailers today to point customers to an extended portfolio of products online.

As e-commerce continues to grow, and as a retailer’s online presence becomes increasingly

important among more tech-savvy customers, look for many retailers to begin offering an

extended range of services online as well in the next few years.

Tesco is already moving in this direction as it attempts to capture an increasing share of its

customers’ time spent online. By providing an extensive range of online services to

complement Tesco’s in-store services, and developing its online communities, the retailer hopes

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that increased time spent engaging with its customers will translate to increased shopper

loyalty.

Retailers:

The highly competitive grocery channel leaves little room to differentiate – online

services will be a key frontier.

Customer engagement and loyalty increasingly begins online.

While a strong online presence is key in today’s progressively digital retail landscape, in-

store execution, where the trip is ultimately won, should still take precedence.

Regardless of scope, integration of a retailer’s services with its core business is crucial

in driving a “one stop shop” customer experience.

Suppliers:

Left: SCA’s Velvet brand advertised as an eco-friendly product in Tesco’s Greener Living Community

Right: Pamper’s new Active Fit diapers line advertised on Tesco’s Baby & Toddler Club

In 2010, 81% of UK shoppers did product research online. While the majority of

purchases are still made in-store, successful brands often win the purchase online,

where an increasing share of planning is made.

Brands can reach targeted demographics through retailers’ niche communities. These

communities represent an underappreciated resource where focused demographics are

engaged and interact weekly.

As always we appreciate your comments and feedback

Let us know what you think!

Bryant Shao Research Analyst RetailNet Group Bryant.Shao@retailnetgroup.com