Is Tesco a Threat to eBay and Amazon?

Sharone Perlstein from small business finance provider ezbob has been looking at the Tesco Marketplace developments with interest. Today he shares his thoughts on how the marketplace has grown, where it’s going, and how it could impact commerce in the UK.

Is the New Marketplace from Tesco a Threat to eBay and Amazon?

Tesco soft-launched its marketplace almost a year ago, initially with just two 3rd parties: electronics retailer Maplins and garden plants supplier Crocus. It has since added baby brand Mamas & Papas, arts and craft business Fred Aldous, online homewares supplier Wayfair, electronics and accessories retailers Purley Gadgets and Trove, garden accessories specialist Thompson & Morgan, and Normans Musical Instruments.

The idea behind Tesco marketplace is to boost the grocery giant’s non-food credentials and make it more of a general destination retailer in the mould of Amazon. Tesco claims it will be adding new partners on a regular basis, and offer a wider range of products from their own supplied inventory and through third parties. By introducing its own marketplace, Tesco will be able to offer goods once considered too low volume for the company via these third party sellers on Tesco Direct so customers will not have to use multiple websites to find what they want. This will lead to more traffic being driven to Tesco Direct, which will in turn increases sales and revenue for the brand.

Tesco’s Unique Attributes

By launching a marketplace, Tesco is moving into an area dominated by Amazon and eBay. While some consider this to be a risky venture, it is worth pointing out Tesco’s unique attributes that gives it an edge over its competitors. The company’s Clubcard points system is one such quality, working as a key driver of customer loyalty that will help it to draw buyers to shop online at Tesco Direct over the two main players. Tesco bank loans are also proving popular and it won’t be long before it offers a complete set of services and products to the UK population.

Perhaps more significant is the fact that with over 6,000 physical stores across the globe, its “Click and Collect” service could be a huge advantage for the retail giant. There are around 800 Tesco stores currently participating in the scheme and further collection points will continue to be rolled out over time. This accessibility will doubtless become a huge draw for customers that purchase goods online, but there’s one more thing that Tesco has to offer that will prove the biggest threat to Amazon’s dominance.

The biggest draw to Tesco for smaller retailers is its extensive distribution network. Competitors will have to start significant investment in their distribution centers to vie with the supermarket chain to the extent that delivery costs and timings will become a battleground and same-day delivery will start to represent a key differentiator.

Tesco recently announced a drop in profits for the first time in some 30 years, so it is hoped the Tesco marketplace will help claw back some losses. While Amazon and eBay may not have reason to be concerned right now, the UK marketplace landscape is evolving and with Tesco’s massive customer base, loyalty scheme and distribution network, there may come a time when the two big players begin to see their dominance significantly threatened.

Tesco’s Latest Plans to Take on Amazon

There is no doubting that at the current time, Amazon is the king of the UK’s media and book market. It is the leading retailer in the business, killing off the likes of HMV on its unrelenting quest for total domination. But it appears Tesco has other ideas, with recent reports suggesting it is set to launch dedicated music and book retailer sites that will sit alongside its Blinkbox online movie store. A couple of big players have been poached to head the new initiatives: Facebook’s head of retail for Europe, Middle East, and Africa, Gavin Sathianathan will head the books operation, dubbed Blinkbocbooks, and former EMI and Warner Music executive, Mark Bennett, will head up Blinkboxmusic.

The three Blinkbox sties will be separated from Tesco’s main online store, carrying just subtle Tesco branding, similar to its Blinkbox from Tesco or bank loans sites. However, the sites will be advertised heavily in its supermarkets, so that its customers will continue shopping with the retail giant for products – including books, music, films and TV box sets – they would normally turn to specialist sites to procure. The millions of customers that have yet to shop online are also in Tesco’s crosshairs.

Tesco is worried about the growing trend of customers that head to Amazon for a single item and end up adding a few household goods to their basket. This is a pattern seen in the US, where customers buy things such as cleaning products as well as luxury items like electrical goods and books at the online retailer behemoth. According to Tesco’s chief exec Phil Clarke, the ultimate aim is to become the world’s largest “multi-channel retailer,” which is what stores that combine physical stores with online retail websites have been coined.

While Tesco doesn’t intend to take on Amazon head on, by playing to its strengths – thousands of bricks-and-mortar stores; being able to deliver within the hour – and by continuing to develop its Tesco marketplace, it has the potential to become a major player in the world of online retail.