UK mass grocery retailer Tesco plans to launch its own brand tablet to capture the growing interest in tablet devices in the country. Tesco already runs a successful mobile virtual network operator (MVNO) in the UK and has a widely recognised brand. Despite strong indications of tablet ownership growth across UK consumers, BMI is sceptical of the demand Tesco can expect for a device with its own brand.
|Growing Demand, But Not For Tesco|
|Households With Tablets (%)|
A report from communications regulator Ofcom at the start of August highlighted the changes in the ways British households consume media. One of the key findings was the increase in households with tablets to 24%, more than doubling in the space of one year. BMI expects this growth to continue, providing sales opportunities for popular consumer device manufacturers such as Apple, Samsung, Microsoft and ASUS, among others. However, BMI believes there is limited demand for a supermarket-branded device such as the Tesco tablet reported by The Sunday Times.
We believe Tesco's tablet would be a low-price device, using a white-label manufacturer from Asia, where white-label production is more common. While we believe the fast growing tablet trend will continue in the UK, BMI believes UK consumers are brand-conscious and have a level of disposable income that allows them to acquire higher-end devices. Unless the device is priced at a significant discount to lower-priced products such as the ASUS Nexus 7 or Amazon's Kindle Fire, we see little incentive for consumers to seek out Tesco's device above those from more established players. Nevertheless, as BMI has pointed out with previous tablet launches, the key to the success of the devices is the content available and this is where Tesco may prove to have an edge.
Tesco offers banking services in addition to its established online retail platforms that use apps and internet sites for e-commerce. Perhaps most importantly, Tesco owns online film distributer BlinkBox, which it intends to offer on its own tablet, according to reports. This would certainly improve the appeal of the device, but BMI believes Tesco would benefit more from expanding the reach of BlinkBox over several platforms and devices, meeting the growing interest in on-demand content used wirelessly.
The tablet market is already flush with low cost devices from well-known electronics brands. BMI believes the Tesco tablet would face fierce competition from low-end devices already reaching the market. We do not expect the device would achieve a significant market share and ultimately offers little advantage in diversification for the company.