Tesco to Take on Microsoft
According to today’s Guardian, Tesco is to take on Microsoft by producing its own brands of software. Now obviously the same guys who roam the aisles and shrug when you ask them where something is, luckily won’t be programming the new software. They have partnered with a company called Formjet who will handle the software creation while Tesco will handle the branding and distribution. Formjet is known for making knockoffs of Microsoft products with varying levels of success.
This type of strategy by Tesco who already sells car insurance, offers financial services and petrol seems to really fly in the face of what most business advisers will tell you. The conventional way of thinking has always been to find your strengths and improve/innovate on them rather then spread yourself thin trying to be all things to all people. Despite taking on some pretty ridiculous business ventures already (anyone have a Tesco computer?), it doesn’t seem to phase them. With the recent announcement of half year profits of £1b (they only crossed the £1b a year hurdle 3 years ago) it would seem to be oddly paying off.
I am probably one of the worst people to give business analysis on Tesco though as I stopped shopping there years ago. Compared to their competitors their stores are far dirtier, their produce bordering on the ridiculous at times in regard to freshness, and staff that are either non existent or incompetent. I suppose the staffing problem may just be indicative of full employment though as comprehension is the biggest issue.
Me: Can you tell me where the sprinkles are?
Them: (Blank Stare)
Me: Hundreds and Thousands - Ya know, the little candy pieces you put on Ice Cream?
Them: ohhh (They walk me to another aisle and proceed to hand me some Bacon Bits)
It will be interesting to watch if these odd offerings pay off in the next few years. An Post, which is our Post Office, did a similar thing offering every service you could think of. In their case however it resulted in massive losses as they struggled with their identity. Their core service of mailing things suffered the most and instead of fixing their issues, they decided to offer extended financial services such as mortgages and advice. It has so far been a disaster.
I would still suggest for those with a small or online business, resist the temptation to try to add profit by taking on unrelated products and expanding your scope. There is way more profit to be had in better sourcing and streamlining. It is a more efficient profit which can be crucial to a business that may have few or no employees.
As far as Tesco is concerned, I look forward to Tesco Hospitals which I am sure aren’t far behind. Maybe they will put in an MRI scanner between aisle 6 and 7.
Comment by andrew wee
Posted on October 13, 2006 at 3:44 pm
Hi Jason,
Honestly i don’t think it’s as ridiculous as it may seem.
consider this, you can already outsource software or other projects to sites like elance.com, rentacoder.com et al.
and since the power is in the list.
tescos by virtue of having a huge brick and mortar presence, has the physical fulfilment outlets to distribute printed and stamped CD or DVD releases.
and software already has a small form factor and a potentially large margin, hence it could significantly bump up their bottomline, couldn’t it?
Comment by Tyler Banfield
Posted on October 25, 2006 at 4:53 am
I think it’s about time for a new post
Comment by Jason
Posted on October 25, 2006 at 8:23 am
Happy Now? hehehe
Comment by andrew wee
Posted on October 28, 2006 at 9:54 pm
Jason,
I’m over the moon!
When’s the next one due?
Comment by Ed the Editor
Posted on November 3, 2006 at 7:29 am
I hope the MRI scanner works better than the bar code scanner did at a local supermarket recently. The check-out girl told me that a bag of grapes was $9.50.
Thinking about it, maybe your Tesco hospital idea isnt so mad after all, as an older person may well have died at the price.
Comment by Chris Andrews
Posted on November 5, 2006 at 10:43 am
I think Tesco have refined the grocery profits to the point they can’t ring any more out of existing line (not without crushing more farmers). So the plan to expand softwarewise isn’t so insane. And one they could execute globally with digital delivery.
Our Tesco (which I think is the largest in the UK) is now going to Argos route with catalogue style shopping too for electrical and luxury goods.
You’re right about the cleanliness and freshess though. Some of them are disgusting. And the fruit & veg rots in days in my house.