There's been a rumor that UK retail giant Tesco may soon make a smartphone to compete with other brands. This is being met with criticism but, the fact is, if brick-and-mortar retailers start making their own phones it could be a big disruptor to the smartphone space.
Making its own phone is not that big a stretch for Tesco; it already makes its own tablet. There are no hard numbers to determine how well Tesco’s tablet is doing, but odds are the company is not after big sales numbers.
Surely what Tesco wants to accomplish with a tablet and as rumors have it a smartphone, is to get you into its retail stores. It wants to give shoppers as many reasons to come into the store as possible, as it knows once inside you’ll end up buying things you otherwise wouldn’t have. If you walk through the front doors of a store, then they’ve got you.
Tesco isn’t the only retailer that will probably make its own smartphone. I expect we’ll see Walmart do the same in the US. They have the resources to produce one, and outlets to sell them. Tesco and Walmart already act as mobile virtual network operators (MVNOs), reselling carrier service under their own brands. It’s a natural fit to bring their own brand of smartphones to market, making them a turnkey solution for customers.
They can offer phone owners a convenient way to pay for phone service, get maintenance, and trade in their branded phone for a refreshed model when available.
Retailers selling their own smartphones will disrupt the industry as it is now. Today smartphone makers compete with each other with hardware features and pricing. They scramble for sales and make deals with carriers. This business model won't apply to retailers like Tesco, Walmart, and Amazon. They simply want to get you in their stores, online or brick-and-mortar, to buy their phone. They'll sell it with their own phone service, too.
It will make financial sense for them to do so as once they have you in the store you’ll probably buy other stuff. Heck, they can give you their phone if they want and still do just fine.
That’s the goal, not phone sales, which gives them a distinct advantage over the major smartphone OEMs. Buy our phone at a cheap price, and don’t forget the steaks for the grill on your way out.