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Can a supermarket phone shake up the mobile market?

Friday, May 9th 2014 by Hannah Langston
This week Tesco caused a stir among the UK tech industry when it announced plans to launch its own-branded smartphone.

Visions of the budget ‘brick’ often sold in supermarkets such as Tesco sprang to mind, although chief executive Philip Clarke was quick to tell the BBC this would be an ‘aggressively priced’[1] model, comparable in specifications to phones such as the Samsung Galaxy S5.

Now, Tesco is no stranger to taking on global technology giants. In 2011 the retailer bought streaming service Blinkbox and subsequently launched music and book download services to rival the mighty Amazon[2]. But the most recent example (and perhaps Tesco’s main reason for launching a smartphone) is the success of its Hudl tablet. Positioned as a low-cost alternative to the iPad and Google tablets, the device has sold over half a million units[3] since it launched in September 2013. A success for a supermarket that sells thousands of different products but a failure when you compare it with the output of technology companies such as Apple, which sold 16 million iPads in the first quarter of 2014[4].

Tesco’s foray into mobile is no doubt innovative; indeed it will be the first smartphone offered by a UK retailer. But, as Guardian tech reporter Samuel Gibbs tweeted earlier this week, “Making your own tablets is one thing. Making an own-brand smartphone is a whole different ball game”[5]. He explained that people are more attached to their smartphones, so there are more complaints when things go wrong.

But Tesco isn’t coming to the mobile phone market cold: they’ve been a mobile virtual network operator since 2003, winning a series of ‘value for money’ awards. However, to compete with the ‘big boys’, the design and features need to be as good as the price.

“Mobile producers like Samsung, HTC, Apple and Sony have spent years developing high-tech devices, that include a long list of features to accommodate even the most demanding tech users out there,” said Markos Zachariadis of Warwick Business School to Forbes. “Breaking into that category directly and gaining the slightest market share is going to be very difficult for new starters like Tesco.”[6]

However, Matt Warman, head of technology at the Telegraph, argues that Tesco will have a well-deserved place in the market: “Whatever the marketing hype, it is unlikely that it will offer the features of an iPhone or an HTC One,” he said, “But it will be in what remains the nation’s most popular supermarket and it will be cheap enough to appeal.”[7]

We’ll have to wait until the smartphone is unveiled later this year to see its true impact on the market. But as Tesco proved with the Hudl, there will always be a market for budget devices.

As Tesco, themselves say, ‘every little helps’.

References

  1. http://www.bbc.co.uk/news/technology-27285787
  2. http://gadgetshow.channel5.com/gadget-show/gadget-news/tesco-takes-on-netflix-and-amazon-with-books-and-music-on-blinkbox
  3. http://www.bbc.co.uk/news/technology-27285787
  4. http://www.theverge.com/2014/1/27/5350106/apple-q1-2014-earnings
  5. http://www.twitter.com/samuelgibbs
  6. http://www.forbes.com/sites/guyclapperton/2014/05/06/apple-samsung-htc-do-we-need-own-brand-smartphones-too/
  7. http://www.telegraph.co.uk/technology/mobile-phones/10810223/Why-we-need-a-phone-from-Tesco.html

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