Tesco to Focus on UK as they Leave Japanese Market

Posted on 21 June, 2012 by Kirsten Kennedy

Tesco commercial properties have faced a difficult few months, with high levels of competition from supermarkets such as Sainsbury’s and Asda often seeing the retailing giant losing customers to more favourable offers. However, it appears that worldwide competition is also becoming a growing problem for the international commercial property chain.

Earlier this week, Tesco agreed upon a deal with Japanese retail giants Aeon, which will see the commercial property supermarket chain exit the market in Japan. Aeon will be responsible for the financial running of the business, and all operations will be controlled by Japan’s biggest retail group.

The takeover will be a two stage process. Firstly, 50 per cent of Tesco’s shares in Tesco Japan will be sold to Aeon for a nominal sum, effectively forming a partnership which sees Aeon becoming jointly responsible for Tesco commercial properties in Japan. Then, in the next phase, Tesco will invest around £40 million into the restructuring programme which will be undertaken by Aeon, at which point Aeon will become completely financially and operationally responsible for the Japanese leg of the commercial property chain.

Chief Executive Officer of Tesco Plc, Philip Clarke, said; “I thank our colleagues in Japan, who have done an excellent job for the business – in particular over recent months.

“We are very pleased to announce this deal with Aeon today, and are confident that this will deliver the best outcome for our staff, for our customers in Japan and for our shareholders.”

Some may see this as a sign that Tesco are losing their grip on the international commercial property market, yet it could be a shrewd move on their part. By handing over the reins to Japan’s most successful retailing group, Tesco commercial properties in Japan will have an insight into the consumer market and therefore will be able to stock things Japanese customers really want, rather than being managed by a head office in a different country entirely.

Additionally, Tesco’s latest acquisition has proven definitively that the commercial property group intends to fight to remain at the top of the food chain. Following the takeover of blinkbox, a highly popular online movie service in the UK, Tesco has added digital music platform WE7 to its expanding portfolio of successful websites. WE7 is free to listen to, personalised for each user and caters to even the most eclectic of music tastes with a library of over 11 million tracks. Tesco believe that this will complement their commercial property music sales, as customers now have the choice of purchasing music in store or listening online.

Digital Director at Tesco, Mark George, says; “Customers and technology together are transforming the way we listen to music. Tesco is already one of the UK’s largest retailers of CDs; this move will help us offer a greater choice for the growing number of customers who want to access music instantly on any device, whenever and wherever they want. 

“WE7 has a great team and a good technology platform from which we can launch a range of digital music services in the future.”

WE7 also seem poised to take full advantage of the £10.8 million deal with the commercial property giants. Steve Purdham, CEO of WE7, believes that the partnership will open new doors for the digital music business.

He says; “We are very excited about the prospect of teaming up with Tesco. With its loyal customer base, numerous marketing channels and international reach, we believe Tesco is the perfect partner to bring WE7’s music services to a wider audience.

“Tesco has been an innovator in entertainment retailing for many years and we look forward to continuing this innovation digitally.”

Do you think Tesco’s expansion into digital music will benefit consumers visiting Tesco commercial properties daily? Or do you believe that, combined with Aeon’s buyout of Tesco shops in Japan, it indicates Tesco’s intention to step back from the commercial property side of its business in favour of online retailing?

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