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Amazon has already gobbled up business after business in the United States. So rather than wait to become its next meal, the largest retailer in the UK is going after Amazon.
Tesco (TSCO), the third largest retailer in the world by revenue (2011 sales were $107 billion) behind Walmart and French shopping giant Carrefour, has purchased e-book seller Mobcast for $7.1 million. That's a tiny amount for the massive grocery chain (in the U.S. you might know it for its Fresh & Easy food stores), but the purchase gets at its strategy to fend off the growing threat from Amazon.
The bulk of Tesco's revenue in its brick-and-mortar stores still comes from selling groceries, but online it flogs everything from women's jeans to sofas, cordless drills and iPads. That is Amazon territory. And to take the fight straight to the heart of Amazon's (AMZN) business, Tesco has been steadily purchasing digital media companies in the hopes of fending off the Seattle-based online retailer, which grew its UK sales 32 percent in Q2 when compared to the same period last year.
Mobcast was started by action-thriller author Andy McNab in 2007, the same year Amazon's Kindle sparked the e-book market. The company sells more than 130,000 UK titles, which can be downloaded and read on all major mobile platforms, including iPhone and Android smartphones, not just a dedicated e-reader.
Clearly, Tesco hopes the acquisition of Mobcast will help shore up its online business to compete with Amazon and Barnes & Noble's (BKS) e-book sales. While it is one of the largest print booksellers in the U.K., Tesco's digital catalog is definitely smaller than Amazon's and Barnes and Noble's – both boast they offer more than one million e-book titles. But more important than boosting the volume of titles it offers, Mobcast gives Tesco its own cloud-based platform from which to sell books, and potentially other digital content.
Mobcast is Tesco's third digital media company acquisition in the last 18 months. Tesco acquired a majority stake in Blinkbox, a video streaming company similar to Netflix in April 2011. In June, Tesco purchased Pandora-like internet radio company WE7 to offer a larger music streaming library to its customers.
Given that Amazon recently partnered with UK's biggest brick-and-mortar bookstore chain Waterstones to sell Kindles to offline shoppers, and that it claims in the UK it sells 114 e-books for every 100 physical books, the online retailer would seem have little to fear from Tesco in the books business. Then again, centuries of would-be invaders have underestimated their British foes. And without any typical British understatement, Tesco seems to be telling Amazon - it's on.
