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The Truth About Tesco's Exit From IT

Posted On - 04/02/2014 11:18:14

Tesco Exits IT: They Can't Afford to Sell It Right
It's easy to gloat over others misfortunes. Especially when the ‘other' is someone we don't like. But if you're hoping this blog workshop is going to be a tirade against Tesco you're going to be disappointed. Because, whilst they may be adept at making tempers run high, just having a rant serves no useful business purpose. It doesn't teach us anything.

So why are we talking about them and what can we learn? Well, Tesco's exit from IT may be a triumph of ambition over ability, may reveal how surprisingly naive they are, and how cavalier they can be with shareholders money, but what it really demonstrates is just how genuinely advantaged you are over them. And how, when it comes to selling and servicing IT, you will always be better.

Tesco isn't as all powerful as it might like to thinkWith over 3,000 stores in the UK, Tesco is Britain's biggest and, debatably, most successful supermarket. Pretty shrewd commercial operators, yeah? Well, you decide. Because in early 2013 they canned their ‘£99 computer repair service' pilot after it failed to prove viable. And by June of the same year their CEO stated they'd be giving up on consumer electronics because it was no longer viable either.
So why the car crash? Why couldn't they make a go of it? Doesn't this just spell ‘the end' for bricks-and-mortar retailing electronics and IT? Isn't this just the final nail in the coffin of small IT retailers? Isn't this, pure and simple, the harbinger of your Armageddon? Since we're sure you'd expect us to disagree here we'll not disappoint. We don't agree with any of this - not a bit of it. But before you throw up your hands in frustration at our almost quixotic belief in you, give us a chance to explain why.

Some things are difficult, others are just made soThere are two types of difficult. Things that are difficult because they genuinely are and things that are difficult because they are made so. In other words there are things that are harder than they need be, because they've been done the wrong way.

Now no-one's denying servicing and retailing of computers isn't hard work. But if you start thinking about your chances of success in selling fresh fruit and veg you start to understand why Tesco's ambitions for IT might not have materialised.

Customers like to buy where it makes sense. It's all part of them being reassured that they're buying from somewhere that knows what it's doing. It's all part of them having confidence where they're buying can be trusted. And even though Tesco is a huge well-known brand, buying or servicing tech at grocer doesn't add up. So like you trying to sell fresh fruit and veg, it's not the selling of IT that's proved difficult for them, it's getting people to take them seriously and buy it at all that has.

Not everyone sees everything the sameBut different people see things differently and while many might baulk at the prospect of laptops being stocked with lasagne, a few won't be phased. Problem is for these intrepid shoppers a fresh challenge awaits.

Whilst they may be prepared to buy tech in a food-hall they're going to find it hard to ask anyone any questions about it. Supermarkets don't have expert staff on hand to take enquiries. So the closest those shoppers will get to an answer will be a label on the edge of a shelf. Assuming there's one there.

Surely Tesco could just hire some staff and problem solved? No. They won't - and this is the crux of why they'll never succeed in selling IT - they can't.

They can't because there's not enough money in it. Tesco like all the big chains is a huge business ravenous - to the point of utter distraction - for margin. Their business has to recover at rates you'd dream of just to remain viable. Their average mark-ups are 80+%. Batteries get marked up 300+% and milk 30+%. Computers don't make anything like this do they?

The result? Shoppers understandably anxious over whether they're making the right choice are left with no way to find out. Because Tesco can't afford the staff. And the fact Tesco can't make a go of it proves just how vital this is to selling IT.

The truth about Tesco's exit from IT is simple. They don't sell it because they can't afford to sell it the right way. And the whole way their business is set up means they'll never be able to get it right. You will always be able to sell and service IT better than them. For more detail see the video.

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