How the supermarkets are disrupting our digital lives

21 April 2011

KindleYesterday, Tesco announced it had taken a majority stake in Blinkbox, an online on-demand service for films and television shows. Today, tech site gdgt is carrying a commentary about Amazon's likely move into tablets. It's an opinion that seems widely supported; the online retailer is apparently developing a tablet device, likely to be manufactured by Samsung, and likely to be marketed as a mainstream, low-cost alternative to the iPad.

Why is Amazon doing this? Because the retailer can make more money by aiding consumption. If Amazon creates a device for facilitating content, customers are likely to buy more from them. The same is exactly true of Apple; the sale of an iPod or an iPhone generates a one-off profit, but once in the hands of a user they're a money-making conduit, selling music, apps and video to the owner for the lifetime of the devices. Hardware is profitable, but it's far easier to make money by skimming revenue from the sale of content.

Amazon and Tesco are uniquely placed to disrupt; they're established hubs of commerce - whether virtual or online - and they already have mainstream traction. They can add new product lines and delivery channels whenever they like - and they do; Amazon has obviously far outstripped its humble bookshop personae, while the Tesco brand has been stretched across new platforms and dozens of products and services to become synonymous with value.

The step into hardware didn't prove too difficult for Amazon; they realised they could own and control a far greater share of the e-book market by creating the device that facilitated consumption. It took four years and three generations of product, but the Kindle is now very much a mainstream consumer product that will only grow in popularity.

Tesco may follow a very similar path with their acquisition of Blinkbox. They already have a consumer base that is purchasing third party content from them, but while DVD sales are hardly Tesco's focus, the company can create a new delivery platform and instantly take a stake in on-demand media and establish themselves in what is still an embryonic market. And like Amazon, Tesco are perfectly placed to go beyond simply delivering the content, and create the hardware too; low-cost set-top boxes that aggregate many other on-demand services. Hardware, on-demand entertainment, monthly subscriptions, brand broadband servies and a mainstream consumer base - Tesco genuinely could deal a blow to current players like Sky and Virgin.

Nobody really saw it coming five years ago, but there's now the very real prospect of an online bookstore and a supermarket disrupting the digital future and determining how we consume entertainment. But it's not because they are global corporations with infrastructure and wealth, although that undeniably helps. It's not about whether they are proficient in technology or recognised as entertainment brands. It's because these businesses are inextricably rooted in community - they're already an integral part of our routines and livelihoods. You don't have to knock on a door to make a sale if you're already in the house.

TOPICS:   Gadgets   TV

2 comments

  • J
    Great article, really clever and insightful! Thanks for sharing!
  • Paul S.
    Thanks mum.

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