Tesco targets Amazon model

UK's largest retailer Tesco opens up website to third parties.

In a move which is seen as its first steps to rival established online players such as Amazon and eBay, Tesco, the UK’s largest retailer – and the third global retailer behind Walmart and Carrefour – has recently opened up its website to third-party resellers.

Shoppers on the Tesco Direct website can now purchase items from electronics specialist Maplin and gardening reseller Crocus following Tesco’s recent ‘under the radar’ launch of its Marketplace offering.

The move comes as Tesco CEO Philip Clarke has promised to double the company’s investments in online initiatives as part of a revamp of the retailer as it struggles to maintain its share in its home UK market. 

A visit to the Home Office page of the Tesco Direct website reveals an unobtrusive link to the Maplin Marketplace shop, offering products in a number of different categories from computing to outdoors.

Prices are the same as on Maplin’s own website, but the advantage for Tesco customers is that they can accumulate points on their Tesco Clubcard loyalty scheme when they purchase from third-party Marketplace resellers. They can also combine orders from different resellers and with products ordered directly from the main Tesco Direct site, so customers can currently pop a packet of flower seeds from Crocus into their baskets when they buy a computer mouse from Maplin.

Tesco is obviously testing the waters with Maplin and Crocus and it is not yet clear how many other resellers will join the Marketplace initiative. It is interesting that the first two partners are strong in categories that Tesco itself is not known for, so it may be looking to create a much smaller Marketplace eco-system that does not cannibalise sales from its own retail or online stores. Amazon, of course, does not have the problem of competing with an existing bricks and mortar network.

What’s probably more at stake for Tesco is developing a stronger e-commerce presence itself, especially as it sees shopping for non-food categories increasingly being made online. Having said that, Tesco’s online sales still reached £2.5 billion ($4 billion) in 2011, so it has by no means been ignoring the online space.

The Tesco Direct website has been revamped and the range of products offered is being doubled to over 75,000 SKUs.

Clicks and bricks

One big advantage that it is looking to drive home is the ‘clicks and bricks’ concept, ordering online and picking up in-store.

“In the UK most of the population is within a ten-minute drive time of a Tesco store, so that ubiquity really does help us,” stated Clarke last month.

Click and collect is currently available at nearly 800 stores in the UK and is being rolled out to a further 700 stores, although with almost 3,000 outlets in various formats in the UK, there is clearly room for this offer to expand.

Tesco is also exporting online initiatives that it has developed in the UK and has just gone live with online sites in the Czech Republic and Poland.

It has also developed the Tesco app for smartphones, which features a click and collect function.

Unfortunately for Marketplace resellers, consumers are locked out of this store pick-up option – for understandable logistical reasons – but that would have been a strong selling point if available. Again, that makes you wonder if Tesco is going to pump the same kinds of resources into the Marketplace offer as it is with its own Direct store.

With Amazon the fastest-growing reseller for many office products manufacturers, the news that Tesco is upping its online capabilities will surely be of interest. Whether the Marketplace concept is where the growth will be as opposed to Tesco’s own proposition remains to be seen.