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Tesco eyes slice of tablet market with 'Hudl'

Workers pass a recruitment banner at Tesco's new distribution facility in Dagenham, east London August 12, 2013. REUTERS/Andrew Winning
Workers pass a recruitment banner at Tesco's new distribution facility in Dagenham, east London August 12, 2013. REUTERS/Andrew Winning

By James Davey

LONDON (Reuters) - Tesco , the world's third-biggest retailer, has entered Britain's intensely competitive tablet market with a low-priced own-brand product that it hopes will boost online shopping and drive sales of its digital entertainment content.

The British firm said on Monday its "Hudl" device, which has a seven-inch screen, runs Google's Android operating system and has 16 gigabytes of storage, would be priced at 119 pounds ($190), taking on a market dominated by Apple , Samsung <005930.KS> and Amazon .

Tesco is attempting to revive its fortunes in its home market after losing share to rivals but has suffered a series of setbacks to its reputation this year, including the discovery across Europe of horsemeat in products labeled as beef.

In June the firm posted a drop in quarterly underlying sales in Britain, resuming a trend seen for most of the past three years and raising doubts about its 1 billion pound turnaround plan.

"It's a reflection of the way Tesco is changing and also a reflection of the way the world around us is changing," Chief Executive Phil Clarke told reporters at the Hudl launch.

Though a quarter of Britain's households own a tablet computer, Clarke said Tesco had identified a gap in the market because many shoppers were put off by the expense and by intimidating technology.

"Tesco in the UK reaches 20 million customers a week, many of whom have not previously considered buying a tablet ... So we are uniquely positioned to open up the tablet market," he said.

The Hudl device has quick access to Tesco's online shopping and banking sites, as well as its blinkbox movies and TV on demand service, Clubcard TV, music streaming and e-book services.

If Tesco customers utilize a scheme that doubles the value of their Clubcard loyalty vouchers they can effectively buy the Hudl for 60 pounds.

"DOING AN AMAZON"

Tesco's device will compete with Amazon's Kindle Fire, which retails for 99 pounds, Google's Nexus 7, which costs 199 pounds and Apple's iPad mini, which sells for 269 pounds.

"If you compare the specification that we've put together with the specification of similarly priced products on the market we'll beat them hands down," said chief information officer Mike McNamara.

Gareth Beavis, phone and tablet editor at online technology publication TechRadar, said Tesco was attempting to "do an Amazon" by encouraging shoppers into buying something that has its own services onboard.

It was a logical move for Tesco, he said, but for consumers possibly less so.

"The Nexus 7 is a few tens of pounds more, but it is an absolutely mind-blowing machine in comparison," he said.

Sebastian James, CEO of Dixons Retail , Europe's second biggest electricals retailer, said earlier this month that although there is a market in Britain for cheap and basic tablets, consumers were often left disappointed by purchases.

"We get a lot back because people use them and they say 'no, what I wanted was an iPad' and they are not," he told Reuters.

"There's a reason why an iPad is more expensive, it's just better."

Tesco declined to say how many Hudls it expected to sell but said its supply chain can be flexed to meet demand.

The device will initially launch in Britain only, though a roll-out to the group's overseas markets in Europe and Asia could be considered in the future.

Shares in Tesco were up 0.3 percent at 377.3 pence at 11.59 GMT (0759 ET), valuing the business at 30.4 billion pounds.

($1 = 0.6250 British pounds)

(Additional reporting by Paul Sandle; Editing by Neil Maidment and David Evans)

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