Will Hudl 2 Save Tesco?
Last week, six retailers including Tesco issued profit warnings. Ernst & Young’s Head of Restructuring commented that shifting consumer behaviours continue to challenge established business models, particularly in food retailing. The main reason mentioned was a crowded and competitive market.
Supermarkets’ consumers expect to be always connected on the move, require immediacy, and are exposed to a huge number of choices. The conventional supermarket space has taken a beating at the hands of discounters like Lidl and Aldi, as is currently very well covered in the news. Changing focus, moving into new markets and areas is more a matter of adapting to survive than innovating.
This competitive landscape has prompted Tesco to explore new channels and customer engagement models. As a result, Tesco launched Hudl in 2013; a 7” tablet that sold 500,000+ units in its first seven months on the market. Although considered as a success, this represents about 0.5% of the UK overall market share where between 12 and 13 million tablets were sold in the UK in 2013.
Earlier this month, I attended a Henley Business School eBusiness Special Interest Group event. The speaker was Aaron Lee, Head of Connected Products at Tesco. Aaron talked us through Tesco’s move into the tablet market and Hudl 2’s improved user experience.
To develop Hudl, Tesco set up an innovation centre in the middle of London’s tech city, just round the corner from the Tobias & Tobias offices. They created an environment to encourage multi-disciplinary collaboration, creativity and innovation. Aaron described an approach, culture and team composition that resembled an innovative start-up. His team came up with the concept for Hudl by sourcing the right hardware, industrial design, and elements built into the software to create an ‘always connected’ Tesco experience.
Hudl includes easy access to a range of Tesco services. This creates a new engagement model, helping Tesco customers to shop, delivering seamless experiences between their browsing and use of Tesco services, and aims to increase loyalty. Beyond grocery shopping, there is access to Tesco’s banking, clothing, homeware services and Tesco Blinkbox, which provides music and movies for rent or purchase.
Although Hudl was described as “easy to use and easy to love”, it constrains some of the Android OS user experience to Tesco-only information. The product designers did not allow for usage scenarios of Android cards (for example) outside of the Tesco experience. Cards such as weather updates, TV, sports, stocks, places nearby, or reminders are not included. There are other lock-ins, although Aaron did say that the Tesco ‘presence’ on the Hudl 2 was completely removable. The only element that is not deletable seems to be the ‘dedicated’ Tesco button in the bottom left of the screen.
Tesco has taken a brave decision in entering the hypercompetitive tablet market taking on giants such as Google, Amazon, Apple and Samsung by launching a competitively priced and technically capable product.
Currently, Tesco has the lowest overall customer satisfaction metrics in the industry. The brand has been compromised with customers becoming disillusioned, and discounters continue to gain popularity. Companies like Chipotle, Crate & Barrel, and Oasis have created shopping experiences that blend physical and digital channels by integrating pre-visit research and shopping, augmenting the in-store experience, and delivering continuous customer journeys.
In an era of rapid change and innovation, Tesco must do more than providing access to digital services; Hudl lacks a coherent focus on transforming ‘brick-2-click’, or ‘click-and-mortar’ retailing. John Lewis, for example, has awarded £100,000 to Localz, a micro-location technology that uses a combination of Bluetooth 4.0 Low Energy (iBeacons), WiFi, GPS, NFC and QR codes to define a shopper’s exact location. The technology creates a number of exciting opportunities to change the customer experience. Some of the ideas include ‘click and collect’, in-shop navigation, location-based promotions, and mobile payments. Even more exciting is the opportunity to track customer behaviours and continually improve the shopping experience.
Hudl 2 is a big step forward for Tesco, but not enough. Aaron was unable to share what his team is planning next; and in recent interviews, Tesco’s new chief executive David Lewis admitted he had no time to get more immersed with the business, but emphasised his focus on customer needs. Let’s hope that Tesco is working on a product that will transform its business model and create a truly innovative omni-channel customer experience.