Smart Enterprise Magazine

Volume 7, Number 2, 2013

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Up Close Disruption the advantage T e s c o ' s R e ta i l B e t: The U.K.'s leader in omni-channel retailing bets its future on the merger of the physical and digital. | By Tom Farre I f there's one thing that burns retailers today, it's consumer "showrooming" — the practice of visiting a brick-and-mortar store merely to browse, then making the actual purchase online to get a lower price. Bolder showrooming consumers go as far as making their online purchases on smartphones and tablets while still in the store. Retailers are desperately trying to combat this practice. One Australian retailer charges "just looking" customers $5 for the privilege. Others, like Best Buy, promise to match prices. Still others carry brands or models that consumers can't find online. Tesco Group, the U.K.'s largest retailer and third largest in the world, has a better idea. It embraces pervasive technology in the hands of consumers and uses it to improve the shopping experience, both in its stores and out. Not that Tesco will abandon its physical locations. With nearly 6,800 stores worldwide — 3,100 of them in the U.K. — Tesco targets 12 global markets for its supermarket business (though a failed effort to expand into the U.S. was recently ended). The company has also branched out to general merchandise, banking and telecom. But as sales in Tesco's traditional stores decline, the company 18 smartenterprisemag.com is investing more in digital services. This year, the company will invest £500 million (approximately $763 million) in technology, three times more than it spent just three years ago. Part of that budget goes to pay some 5,000 technologists worldwide, of whom more than 3,000 work at Tesco's development center in Bangalore, India. Tesco CEO Philip Clarke, speaking at the recent World Retail Conference in Singapore, said Tesco "wouldn't simply grow by buying more real estate, but instead change the way we engage our customers and embrace digital retailing." Clarke added, "In the future, app development is going to be just as important as property development." The need for a digital approach stems from changes in consumer behavior. Mobile commerce is growing astronomically, ever more consumers carry smartphones and tablets, and 600 million people use Facebook every day. "I've been saying since 2010 that the store [in general] is in trouble, and that hasn't changed much in the intervening years," says Nikki Baird, Managing Partner at RSR Research, a retail-industry research firm. "The retail store simply is not keeping up with the standards for a customer shopping experience that are continually being raised online. Between personalization, rich photographY: Jason grow All-in

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