How an Appstore Helped Tesco HSC Set Up Online Shops in New Markets

Summary:

How Tesco, the world’s third largest retailer, modeled the success of its online grocery platform in the UK on Eastern European markets quickly and on the cheap.

The Organization: It might come as a surprise to many that the Brits are the world’s biggest online shoppers, not the Americans, not the Japanese. But that didn’t surprise executives at Tesco. When an independent regulator in the UK, Ofcom, came out with this finding, the folks at Tesco smiled knowingly. With revenues of $3.2 billion (about Rs 16,500 crore), Tesco is one of the most profitable online grocery retailers in the UK and it knew just how much the English love to shop online.

Tesco wasn’t happy just being a leader in the UK, though, and had set its sights on new markets. However, if Tesco wanted to replicate its success in the UK in other international markets, it had to come up with a plan that would allow it to roll out its online stores in new geographies quickly and cost-effectively.

The Business Case: In early 2011, Tesco revealed its targets to double returns from 5 percent to 10 percent in its developing markets that comprised Czech Republic, Poland, Slovakia, Thailand, and Malaysia. In order to achieve this, it wanted to expand its smaller format stores, and also launch an online grocery operation across the whole of Eastern Europe, Thailand, and Malaysia.

And it had to do it fast. “It was extremely important for Tesco to get the first mover advantage in some of the countries in Eastern Europe because we saw a growing business potential in these countries,” says Vinod Bidarkoppa, director IT and CIO, Tesco HSC India. He wasn’t shooting in the dark. The company had conducted surveys in Czech Republic, where nearly 80 percent of the sample population voted for an online grocery home shopping service that could deliver a fresh and reliable range of products.

Tesco decided to lap up this opportunity.

It was extremely important for Tesco to get the first mover advantage in some of the countries in Eastern Europe because we saw a growing business potential in these countries.

The Project:  The mandate was clear. Tesco needed to create online shops in two different continents, on the cheap and fast.

Creating a new e-commerce platform for each country would counter the company’s objective. The best way, Bidarkoppa’s team realized, was to create a standard template on a virtualized server infrastructure and hosting model. “We created this template using a combination of an off-the-shelf product and some custom services and components in order to create a multi-tenant platform which can be built once and deployed multiple times,” says Bidarkoppa.

This off-the-shelf product has features akin to an app store. It holds single-serve codes—in a multi-tenant environment—like language, regulatory compliance codes, etcetera for each country. For example, Tesco Poland can pick up the component from the software—like downloading apps from an app store—that are relevant to its site. And Tesco Thailand can do the same. Also, the sites in these countries would run on instances of the virtualized platform.

In order to ensure that customers across the world enjoy the same experience,  Bidarkoppa and his team created a service layer using the SOA design principles and integrated several of their existing systems like product pricing and promotion systems, POS and fulfillment systems etcetera into the platform. “So a customer shopping on the online grocery store wouldn’t know that a single app store model in the backend is leveraging all the operations that he performs on it—from viewing the website in the local language, to browsing for different products, to buying and paying  for them.”

At the end of 18 months, the team at Tesco HSC launched an online grocery site for Czech Republic.

 The Benefits: The platform has reduced the cost of deployment and the time to market significantly. It offers Czech customers over 20,000 lines of fresh and frozen food and groceries, and other items such as toys, stationery, and accessories. 

 Tesco has already rolled out this offering in Czech Republic, Poland, Slovakia, Hungary, and Thailand. “From the time the platform was launched in the Czech Republic, we took just three months to on-board Poland and Slovakia.”

 The online service allows Tesco customers to shop in their local language and choose from multiple modes of payment. Since the deployment, in the weeks following the launch, Tesco already had more than 100,000 customers registering on the new online service and more than five million items sold across countries in Eastern Europe.

“It was important for us to provide this additional channel to our customers so that we could on-board different countries in a region and also roll-out different services to different stores as we expanded our online presence,” says Bidarkoppa. 

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It was extremely important for Tesco to get the first mover advantage in some of the countries in Eastern Europe because we saw a growing business potential in these countries.