Tesco plans to save its online entertainment business through expansion

Tesco is challenging Amazon by trying to stop the drift of its online customers with the launch of two specialist ebook and music retail websites later this year. The specialist ebook and music retail websites will add to the Blinkbox online movie store which the supermarket giant already owns. Gavin Sathianathan, Facebook’s head of retail for Europe, the Middle East and Africa, will lead the books operation, Blinkboxbooks. Mark Bennett, a former EMI and Warner Music executive who now heads Sainsbury’s digital entertainment unit, will head up Blinkboxmusic. Tesco’s attempts to expand its entertainment business was also seen when it was keen to acquire stores of the collapsed music retailer HMV.

As a part of its expansion strategy to compete with the likes of Amazon and Apple which are eating into the entertainment business of Tesco, the supermarket chain acquired an 80% stake in the Blinkbox film and TV site in 2011. Blinkbox customers can buy or rent new movies by downloading them over the internet, in a similar way to movie rental services like Netflix or Amazon’s Lovefilm. An added advantage for Blinknox users is that the online movie store’s sales model allows it to offer recent box office hits, such as Skyfall, much earlier than those rivals, and even ahead of pay-TV operations like BSkyB.

Although it has been two years since the acquisition of Blinkbox, Tesco has woken up to spring into action now. The three Blinkbox retail sites will sit separately from Tescos’ main online store and will only carry subtle Tesco branding. However, the supermarket will advertise the sites heavily in store and use them to ensure that customers in search of specialist online sites for books, music, films and TV box sets continue buying from the Tesco empire instead of falling into the habit of shopping for entertainment products elsewhere. It will target the millions of customers who still haven’t started shopping online in a big way. This way, Tesco aims to halt the steady drift of customers to Amazon for just one sort of item only to turn to the mammoth online retailer for a large range of household goods.

The new television station will be available to members of Tesco’s ClubCard loyalty scheme, free of charge, and will offer a mix of archive films and television shows. Initially it will only be available over the internet, but Tesco is in discussions with satellite and cable broadcasters about turning it into a mainstream television channel.