Wal-Mart and Tesco are going digital

This week has seen two intriguing acquisitions take place: US retail giant Wal-Mart and its UK counterpart Tesco both acquiring promising digital businesses. Last Monday, Wal-Mart bought social media firm Kosmix based in Silicon Valley and yesterday Tesco announced its purchase of a 80% stake in Blinkbox a UK-based online video streaming business.

It looks like we have a got a bit of a trend on our hands here: established retail companies buying into digital expertise and technology in order to successfully exploit the opportunities that social media, video and mobile have to offer.

“We are expanding our capabilities in today’s rapidly growing social commerce environment,” Eduardo Castro-Wright, vice chairman at Wal-Mart, said in a statement on Monday. “Social networking and mobile applications are increasingly becoming a part of our customers’ day-to-day lives globally, influencing how they think about shopping.”

Wal-Mart, a company that already has a strong track record in e-commerce and tracking how customers spend their money, is now looking at social media as another channel to generate revenue from. Kosmix is a social media filter aggregating information by topic from web sites, tweets and other online sources in real time*. The underlying idea is that this acquisition will provide Wal-Mart with valuable customer insights as well as provide a platform to further engage with customers.

Even though it’s a different kind of transaction, Tesco taking a significant stake in video streaming business Blinkbox, demonstrates a foray into “multi-channel retailing” similar to Wal-Mart’s purchase of Kosmix. Blinkbox offers TV and films for streaming and downloading with both ad-supported and paid-access models. It claims 2m monthly users and a 9,000-strong content catalogue and aims to significantly expand this catalogue.

I wonder how anxious the likes of Amazon and Sky felt when they found out about retail colossus Tesco venturing into video streaming. It has only been a few months since Amazon bought Lovefilm in a serious attempt to create a strong foothold into this very promising and lucrative marketplace. “We can link physical purchase of a product to the building of digital collections in a new and seamless way,” Tesco’s UK head, Richard Brasher, said. With Tesco’s current market power, it will definitely become an online video force to be reckoned with.

In short, these are the main things I have learned from both acquisitions:

  1. Social media and (online) retail form a very good combination – Whether it’s Groupon or Kosmix, social media based applications are no longer seen as just an extra marketing tool but as a business opportunity in its own right.
  2. Data is still king – Perhaps less so with the Blinkbox acquisition, but the depth of consumer data that Wal-Mart can potentially derive from using Kosmix technology seems massive.
  3. It’s all about web-based retail services! Both Wal-Mart and Teso are working hard to really grow their revenue from online retail. For instance, the Blinkbox move plays an important part in Tesco’s strategy to create its own online market place for content.

Main learning point: predicting that there will be a wave of acquisitions in the online space is not rocket science. Deals like the ones for Kosmix and Blinkbox, if anything, clearly show that established “brick and mortar” companies are increasingly looking to expand online and tap into the digital talent and technology already out there.

I’m not a technical guru but my developer peers keep telling me that even with ‘real time’ there is going to be a (minimal) time lag. Noted.

Related links for further learning:

http://dealbook.nytimes.com/2011/04/19/wal-mart-buys-social-media-site-kosmix/?ref=technology

http://www.ft.com/cms/s/0/91f2e84c-6a13-11e0-86e4-00144feab49a.html#axzz1K8ruGg4f

http://anand.typepad.com/datawocky/2011/04/retail-social-mobile-walmartlabs.html

http://www.guardian.co.uk/media/pda/2011/apr/20/tesco-blinkbox

http://eu.techcrunch.com/2011/04/20/tesco-acquires-majority-of-blinkbox-to-take-internet-on-tv-mainstream/

http://www.bbc.co.uk/news/technology-13141985

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