Tesco, one of the UK’s leading retailers, has launched a new online marketplace, offering customers access to around 9,000 third-party products. This move aims to transform Tesco into a comprehensive one-stop shop for a wide array of consumer needs.
Market Environment
The retail environment has shifted significantly since Tesco’s initial marketplace attempt with Tesco Direct in 2006. Back then, the launch was part of a broader strategy to diversify beyond groceries, venturing into areas like restaurants and own-label tablet computers. According to PwC senior retail adviser Kien Tan, Tesco Direct was a separate, stand-alone website that wasn’t integrated into the main Tesco.com experience. This attempt to compete with Argos came at a difficult time for Tesco, which was grappling with an accounting scandal and a substantial £6.4bn loss in 2014/15. The focus shifted back to rebuilding the core grocery business, leading to the closure of non-core ventures like Tesco Direct.
Today, the market landscape is more favorable for the Tesco Marketplace. As Retail Gazzete rightly points out, Tesco has seen its profits more than double in the last financial year, and the online market has grown significantly. The marketplace model has proven successful for many retailers, with B&Q, Superdrug, and global giants like Walmart, Carrefour, and Kroger launching their versions. This model is now well-accepted by consumers, making it an ideal time for Tesco to re-enter this space.
The new Tesco Marketplace differs from its predecessor by focusing on serving existing Tesco customers rather than competing directly with giants like Amazon. It offers a curated selection of products from proven marketplace suppliers, with more sellers being added gradually. This approach limits Tesco’s exposure to issues like late deliveries or fulfillment errors, as third-party vendors are responsible for fulfilling their orders. Customers pay separately for items from third-party sellers, which have their own delivery charges, ensuring transparency and maintaining Tesco’s high standards.
The combination of a robust, integrated platform and a healthier market environment positions Tesco Marketplace for success, building on Tesco’s strong online retail presence and extensive Clubcard membership base.
Vision and Goals
Tesco’s vision for the marketplace is to provide customers with a broad selection of products, enhancing their shopping experience by filling potential gaps in their offerings. The marketplace is integrated into Tesco’s existing online platform, allowing seamless access to both Tesco groceries and third-party products.
Product Range
The marketplace features products across diverse categories, including garden, DIY, homeware, toys, and pet care. These items appear alongside Tesco’s own groceries on their website and app, offering customers convenience and a unified shopping experience.
Fulfilment Model
Unlike Tesco’s own products, which are fulfilled by Tesco, the marketplace products are fulfilled directly by the suppliers. This model ensures efficient and direct delivery from the supplier to the customer, aiming to maintain high standards of service and satisfaction.
Customer Empowerment
By expanding their range through the marketplace, Tesco aims to empower customers with more choices. The inclusion of third-party products is designed to enhance variety and meet diverse consumer needs, making Tesco a more versatile and comprehensive shopping destination.
Unique Selling Point: Clubcard Integration
Shoppers will also be able to earn Clubcard points on all purchases. This launch builds on Tesco’s success as the UK’s leading online retailer with 22 million Clubcard members and 1.2 million orders each week on Tesco.com.
PwC senior retail adviser Kien Tan highlights that Tesco’s biggest USP in launching a marketplace is its vast Clubcard membership, more than half of whom use its mobile app. He states, “The expansion of Clubcard Prices and integration of multiple Tesco shopping, payment, and loyalty apps into a single ‘super-app’ has increased membership sign-ups and given the almost 30-year-old loyalty program new impetus. This serves as a ready and willing customer base for the non-grocery products being added on the marketplace.”
GlobalData associate analyst Sophie Mitchell agrees, noting that the ability to collect Clubcard points may encourage avid loyalty scheme members to use Tesco’s marketplace over other options.
Opportunities for Brands and Retailers
The launch of Tesco’s new marketplace presents exciting opportunities for retailers and brands. By becoming part of this expansive platform, businesses can significantly enhance their reach and visibility. Here are some key opportunities:
- Increased Exposure: With Tesco’s vast customer base, retailers can tap into millions of potential buyers who regularly shop on Tesco.com. This increased exposure can drive higher sales and brand recognition.
- Seamless Integration: Tesco’s marketplace allows brands to integrate their products seamlessly alongside Tesco’s offerings. This integration can simplify the shopping experience for customers, making it easier for them to discover and purchase third-party products.
- Clubcard Points: The ability for customers to earn Clubcard points on all purchases, including those from third-party sellers, is a significant advantage. This loyalty scheme can encourage repeat purchases and foster customer loyalty, benefiting both Tesco and participating brands.
- Trust and Reliability: Associating with Tesco, a trusted and well-established retailer, can enhance a brand’s credibility. Customers are more likely to trust and purchase products from a platform they are familiar with, which can lead to increased sales and customer satisfaction.
In summary, Tesco’s new marketplace not only broadens the range of products available to customers but also provides retailers and brands with a powerful platform to grow their business, engage with a larger audience, and leverage the strength of Tesco’s brand and loyalty programs.
Integrating with Tesco Marketplace via Despatch Cloud
Tesco Marketplace is on our roadmap for channel integrations at Despatch Cloud. Soon, our customers will be able to connect to Tesco Marketplace just as easily as with any other platform. Simply use the Sales Channels Directory to introduce your Tesco Marketplace account credentials. Our API will handle the rest, pulling in orders and stock data from Tesco Marketplace into your management system and sending back fulfilment information seamlessly.
Conclusion
The launch of Tesco’s new online marketplace is a game-changer for both the retailer and partnering brands. Offering around 9,000 third-party products, Tesco aims to be a one-stop shop for all customer needs, leveraging its strong online presence and extensive Clubcard membership.
Brands can benefit significantly from this new platform. With increased exposure to Tesco’s vast customer base, seamless integration alongside Tesco’s offerings, and the loyalty boost from Clubcard points, participating brands are well-positioned to drive higher sales and brand recognition.
Despatch Cloud will soon integrate with Tesco Marketplace, further streamlining operations for our users. By seamlessly managing orders and stock data, our integration will make it easier for brands to take full advantage of this exciting new platform. Stay tuned for more updates on this development.