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Tesco to reduce IT spend in a bid to cut costs

Caroline Baldwin

Supermarket giant Tesco has announced it will be cutting costs from its IT budget to save money.

The announcement that Tesco plans to reduce its IT spend comes after the retailer reduced its profit forecast for 2014/15 from £2.8bn to £2.4bn

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The retailer said it was continuing to face a number of uncertainties and consequently the board had revised its outlook for the year.

“The combination of challenging trading conditions and ongoing investment in our customer offer has continued to impact the expected financial performance of the group,” said Tesco's trading statement.

Trading profit for the six months to 23 August 2014 is now expected to be in the region of £1.1bn.

The retailer also plans to cut costs by slowing the roll-out of its refurbished stores.

In April, the retailer blamed its shift into the online retailing space for its drop in profits and poor annual results. While Tesco was seeing strong UK growth in online shopping, it saw an overall fall in profit.

Tesco’s technology innovations

The news of the cuts to Tesco’s IT spend comes as a surprise, as the retailer has always been at the forefront of providing digital and data-driven experiences for its customers.

The retailer, which was the first to provide online grocery shopping for home delivery, has implemented many innovative technologies, including augmented reality mirrors in-store, its own 7in tablet and its data-driven loyalty card scheme, the Clubcard.

At the beginning of the 2014 financial year, Tesco announced plans to expand its multichannel portfolio by launching a digital wallet, as well as a number of other digital services.

These services were designed to sit alongside Tesco’s other digital services, including its magazine app, one-touch add-to-basket function and click and collect, to make up a “futuristic multichannel journey” for its customers.

Scan as you Shop, Clubcard check-in and Clubcard voucher prompting were all in pilot mode in September 2013, and the retailer had plans to launch a digital wallet to enable checkout purchase via mobile, as well as the ability to receive receipts to customer accounts.

But no announcements on any of the services have been widely made by the retailer since.

Computer Weekly has contacted Tesco three times in the past month to ask for an update on progress, but is yet to receive a response.

Tesco’s chief marketing officer (CMO) Matt Atkinson told Computer Weekly in 2013 that the Clubcard loyalty scheme lends itself well in the mobile space, and that a mobile wallet combines what a customer wants in one place.

Atkinson also said in September 2013 that a fully-integrated digital mobile wallet – the Tesco Home Plus – would be launching within a year. It is already live in Korea, where customers can shop and pay using their mobile wallet app.

On 28 August, online supermarket retailer Ocado suffered from a fall in its share prices, after an analyst deemed the financial market had overestimated the value of its technology.

Share prices dropped by almost 16% to 339.30p, as analyst house Redburn released a report stating Ocado’s technology patents were not unique to the retailer, meaning the company was less valuable than originally thought.


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