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by Dean Marsden on 22nd April 2013
This month I want to talk about how Traditional Brands can and actually are investing in digital media and services, not just their own websites. With the boom in online shopping and digital media as a whole, how do existing offline brands get involved? I believe they should all be making an effort to get a piece of the digital market in order to attempt to survive the downturn we are seeing in High Street shopping and services.
This post follows on nicely from my post in February which asked the question ‘How Much Is The Internet to Blame For High Street Retailers Going Under?’. If you get time to read both these posts then I recommend that, however this post is easily understood without reading it as well.
In my opinion, the biggest retail brand in the UK who is making headway into the digital market is Tesco. When you think of Tesco, you might imagine food shopping and Tesco extra, but there is whole extra digital dimension to Tesco which they’ve not been scared to invest in it. Supermarkets have already diversified into banking, finance, insurance, travel, clothing lines and so on but what about digital?
Tesco Mobile, for example, is Tesco’s go at getting a slice of the booming mobile communications market. But its digital media services where Tesco have more recently invested in and are now pushing. It’s this sort of diversification that has led to Tesco being one the biggest retailers in the world and will help it stay there.
The video and DVD rental market saw the emergence of video-on-demand services around 2006. One start up named Blinkbox was created by former senior executives of Channel 4 and Vodafone and was launched in 2008 with the extra help of venture capital firms.
In April 2011, Tesco acquired an 80% stake in Blinkbox from the venture capital owners. Since then the service has grown substantially following further deals with movie studios, a deal with Samsung to integrate the service with new Smart TVs and Blinkbox was the first video-on-demand service to stream content through PlayStation 3 consoles. The service also powers YouTube’s Movies section, giving a huge boost to their potential number of customers though YouTube’s giant UK audience.
Blinkbox may not have had the success it has seen without these crucial deals but Tesco has been a part of its growth for the last two years.
Prior to the popularity of video-on-demand services, the music industry had seen big changes from users switching from CD’s to online music streaming and downloading. Streaming services attempted to replicate traditional radio media with ad-supported music. It was often hard to secure advertising, but this didn’t put Peter Gabriel off co-founding We7 in 2007.
We7 started life as an on demand music streaming service but is now a DJ music service, where playlists of popular pre-selected songs are streamed to users. In June 2012, Tesco acquired We7 for £10.8 million. We7 had turned a profit in 2010 shortly before making a loss. So the profitability of We7 remains unknown but Tesco has now got its share of the online music market through this 3rd party brand. Shortly after Tesco bought We7 they closed their own online MP3 store, obviously realising that subscription based streaming services were becoming more popular such as Spotify and Pandora.
The other area which Tesco is looking to make its mark on is online marketplaces such as eBay and Amazon. It wasn’t too long ago that I remember the Tesco website was a bit slow and clunky. There were a good number of products available online due to the Tesco Direct division of Tesco PLC however they must have realised this was not even enough. Right now you can buy practically everything via Tesco Sellers, with more and more ‘Sellers’ being added each month. The Tesco website states that Sellers have been added to the website ‘Because we want to make it easy for you to find the widest range of products at low prices, all in one place.’ It’s very similar to Amazon.co.uk, which must be what they are working towards creating.
When comparison websites became popular, Tesco also got in on the act by launching its own in 2007. Is there nothing that Tesco won’t invest in? Cash for Gold, Car Tyres, Film Production? All of these are part of Tesco PLC.
Tesco isn’t a standout case for a traditional brand investing in digital media. Companies such as TimeWarner joined with AOL and own a variety of highly successful online publications. Disney now focus a lot of their energy on building interactive Apps and distribute their media online.
As any business studies student or business professional should realise, if you want to grow faster, sometimes you need to diversify and if you want to become more secure the proverb says it all; “Don’t put all your eggs in one basket”. This happens across the web with even greater velocity than physical businesses. Take a look at Google, who started out as just a search engine and now own a huge range on online and offline products.
I believe diversification is not only a good option for a retail brand that is looking to generate more custom but also for all online services looking to increase their user base and reach. This is because the nature of online business/services change so fast that traditional, slow but steady investment does not necessarily work in online quite as well.
As noted in my previous blog about the decline of the High Street, a successful digital strategy needs to be a big part of most retailers and traditional brand’s strategy, whether this is just through their own website or through buying up existing web properties such as forums, blogs or how to websites.
An example of this might be; a local interior design business who expands into eCommerce by setting up and online shop. This would increase their customer reach to a much wider audience. Another example might be a large whole foods manufacturer who creates a social network for healthy food lovers to increase the potential customer base by being associated with an online community.
There are a number of different ways brands could be creating an online asset. Business owners know that business assets are important to create a stable and valuable company, so the same applies to online assets.
There is one major stumbling block with this which is convincing traditional companies to build their digital assets to add value, they typically don’t understand how a digital asset can be as valuable as a physical asset. It’s not as straight forward when valuing a non-physical asset compared to a physical business asset such as machinery, stock or bricks and mortar.
It’s the same case for Digital Media companies. How do companies like Koozai put forward the value of SEO? We translate online engagement into predicted sales/conversions using existing analytics data and online trends. Brand measurement is fast becoming an important aspect of online also, so relating this back to a traditional company means likening it to real world signage, advertising and word of mouth.
No matter how big or small your business is or whether you are solely based offline or online, you should be looking at ways to invest more in digital assets and services to secure a better future for your business or brand. If you have seen other creative ways brands have done this then please leave them below: