Tescoís expected move into the digital music space has finally happened, with a value driven positioning that sits snugly along side their competitively priced CD strategy. It also fits in perfectly with their overall strategy of being the one stop shop for your average consumer who is not necessarily and aficionado of any particular thing but a moderate enthusiast of many things, be it CDs or Internet access. And of course, itís the perfect content complement to Tescoís recent no limits DSL offering.
The European digital music market is still in its relatively early stages and as such there is still plenty of room for new entrants. Somewhere down the line of course their will be the inevitable shake out, but I would put money on Tesco not only surviving the market consolidation, but becoming firmly established as a significant player. Over the last few years Tesco have entered into numerous new product areas that have not only had a clear objective of appealing to the mainstream and value conscious consumer but of also enhancing choice and overall satisfaction for existing customers. If necessary they can loss lead to do that. Tesco played a huge role in bringing down the average price of CDs in the UK high street and, as we discussed in one of our reports on this area (click here), Tesco will be able to be highly competitive and offset losses or reduced margins with other higher margin products. While Apple can sell iPods to offset margins, all Tesco needs to do is sell a few more tins of baked beans.