Tesco preps for Big Data Engine dump: Laters, Clubcard dev
Retailer parts ways with Dunnhumby
Retail titan Tesco is investigating the sale of Dunnhumby, the big data and data science wrangler it took over in 2004, which had helped propel the supermarket to national dominance.
Tesco, Britain’s largest food retailer, has confirmed it has appointed a team of strategic advisors to explore “strategic options” for Dunnhumby.
Dunnhumby was the brains behind Tesco’s Clubcard loyalty scheme, a ground-breaker in British retail that allowed it to gain insight into customers’ buying habits and therefore extract more value - money.
Launched in 1995, the Clubcard helped propel Tesco to become the UK’s largest food retailer - toppling long-time incumbent Sainsbury’s.
At its height, it was said one pound in every seven spent in the UK was spent at Tesco.
International ads, marketing and PR group WPP is reported to be interested in snapping up the supermarket’s big-data science operation for £2bn. A Tesco spokesperson refused to comment on the rumour when contacted by The Register.
Tesco is also exiting the internet and video businesses it bought in to in recent years, selling Tesco Broadband and its loss-making Blinkbox video streaming businesses to ISP TalkTalk.
Tesco took an 80 per cent stake in Blinkbox in 2011, crowing it would "link physical purchase of a product to the building of digital collections".
Tesco is surrendering an estimated 75,000 internet and 20,000 voice households to TalkTalk.
The giant is puling out of data science, content and service provision as part of a massive restructuring to save money and cut costs, with disappointing Christmas trading the final nail in terrible year for Tesco.
Tesco has been hit by falling sales and profits thanks to intense price competition that it has seemed unable to answer: at Christmas, sales were down by 0.3 per cent, albeit better than the year before.
Tesco also misstated half-year profits in 2014 by £250m, leading to the suspension of several executives and investigation by financial regulators.
Dumping its network and data operations is meant to help management reach a goal of cutting capital expenditure by £1bn and achieve annual savings of £250m. Also for the chopping block are 43 unprofitable Tesco stores.
A new CEO, the freshly resigned Halfords boss Matt Davies, has been appointed six months after David Lewis was named group CEO. Lewis's predecessor, Philip Clarke, was ousted following the retailer’s latest profit warning.
Loss of internet and data science mark the end of a period of expansion and diversion into new, non-core trading areas for the giant.
While owned as a subsidiary, Dunnhumby continued to operate for others; customers include US retail icon Macy's and giant Kroger along with CocaCola. Dunnhumby bought blogger marketing network BzzAgent for $60m, a deal celebrated as Tesco "buying" into adtech.
Some will question the wisdom of Tesco dumping Dunnhumby at time when, arguably, it needs the unit’s data-science wizardry most. Dunnhumby's brains could once more mine Tesco's customer and market data to improve sales and performance.
Demonstrably old businesses hands are on the wheel, though, and cash on the balance sheet is seen as more important to business need.
Tesco’s journey should prove cautionary for others in verticals tempted take on and spin up such units, taking them outside their core. ®