The Tesco smartphone: why the supermarket is trying to compete with Apple

Chief exec Philip Clarke says he wants to launch a high-end phone. The likelihood of its being able to compete with the smartphone big boys is slim...

by Rachel Savage
Last Updated: 06 May 2014

When your core business is under pressure, it’s time to diversify. That seems to be Tesco chief exec Philip Clarke’s strategy anyway, with the announcement the supermarket is launching an own-branded smartphone by the end of this year.

The phone will run Google’s Android operating system and be comparable to Samsung’s Galaxy S5, but ‘aggressively priced’, according to the BBC. It will also (unsurprisingly) be pre-loaded with Tesco services such as Blinkbox video streaming.

The proposed launch follows Tesco’s foray into the lucrative gadgets market with the Hudl tablet last year. So far it has shifted half a million of them and a follow-up Hudl 2 is due for release in September.

However, the retailer’s tablet is £119 and designed to compete with other low-spec models, as opposed to the new phone, which is targeted at the high end of the market. Moreover, smartphone sales are actually slowing in the UK and other developing countries - basically, most of us have got rid of our bricks by now.

Tesco isn’t, therefore, going to become Apple 2.0. More likely, the supermarket, which has been losing grocery market share to discounters Aldi and Lidl and middle class haven Waitrose, will lure current customers onto its new phones in the hope they’ll spend more with it on services like online shopping. For example, £60 of Clubcard vouchers will buy you a Hudl - expect a similar sort of deal for the new phone.

The supermarket giant is coming at the issue of its squeezed market share from another angle too: uber-discounting. 'Pound Shop' zones, with some products being sold for 50p (perhaps its Everyday Value range is just being moved...) are already in 60 of Tesco's large stores and will be in almost 300 in the next few weeks.

Clarke also said there would no new hyper-huge Tesco Extra stores under his reign and hinted he plans to stay at the supermarket until 2020. ‘I'm 54 and I have been at it for 40 years,’ he told the BBC. ‘I think normally in Britain people like me retire at 60 and that gives me another six years.’

However, if results continue to be as parlous as they have been lately, no amount of shiny new gadgets can keep Clarke at the helm until a happy retirement.

Find this article useful?

Get more great articles like this in your inbox every lunchtime

Subscribe

Get your essential reading delivered. Subscribe to Management Today