Tesco.com moves into software sales

Retail giant sets its sights on IT incumbents with new range of low-cost products

Tesco has announced it is to move into the software market, with the launch of a range of low-cost office productivity applications set to challenge Microsoft, Symantec and other big-name incumbents. The announcement came as the firm revealed further high growth in its online business, which experts have said could spur greater competition between internet retailers.

The supermarket giant will initially release six own-brand products, developed by UK distributor Formjet, including an antivirus product, an office suite and a personal finance tool. Tesco said its aim is to introduce more choice for the consumer and home office worker at a low price – each title will be available for under £20.

David Emm of Kaspersky Lab questioned whether the Tesco-branded software will appeal to consumers, saying that it would appear more credible if it was seen to come from a trusted vendor with a strong track record in producing software.

"Consumer habits definitely influence enterprise IT; home buyers are often technical recommenders for products in the enterprise," he explained. "So it is surprising that it is branded as Tesco's because enterprises want to know about the pedigree [of the product] and the support infrastructure available."

Simon Heron, director of unified threat management specialist Network Box, warned that there may be interoperability problems with corporate software, especially with Tesco's antivirus product, if enterprises do not have strict policies on what remote workers can and can't download on their corporate laptops.

David Mitchell of analyst Ovum also argued that "interoperability with the category dominants" such as Microsoft Office would be key to its success, as would Tesco's marketing power. He added that high quality, low price or free products like OpenOffice.org already exist but are easily outsold by their more expensive rivals.

"However, the software market is far from static. If the Tesco products do not see the transition to SaaS [software as a service] as relevant and embrace it, then the retailer might just produce a damp squib," he argued.

The announcement came as Tesco revealed its half yearly profits for its online business are up 43 percent, boosted by the success of Tesco.com and its new Tesco Direct catalogue service, which will shortly be joined by customer-support site TescoSoftware.com.

The internet channel will be a key factor in the retail giant achieving its aim of becoming "as strong in non-food as in food", but experts said its growing dominance online is unlikely to negatively impact smaller players.

James Roper of industry body the Interactive Media in Retail Group (IMRG) said that by providing a better service – for example two-hour delivery slots and short lead times on furniture orders – Tesco is setting a standard for its competitors to follow.

"This is a good thing for the online retail industry; Tesco is pushing the envelope and forcing the competition to step up and compete," he argued. "We will never see a situation where everyone opts to shop with only one merchant."