Can Tesco's Tablet Actually Be A Good Idea? Maybe

Is Tesco crazy? You'd think so from some reactions to the U.K. retail giant's rumored plans to start selling its own branded tablet. Tesco is no Apple or Amazon or Google, say some observers, and look what happened to Barnes & Noble. A Tesco tablet is a guaranteed catastrophe.

They probably don't like the name "Hudl" either.

And if we were talking about the idea of retailers in general slapping their names on generic Chinese tablets as if they could be the next Apple or Amazon, those critics would certainly be right. If that's really all Tesco has in mind—and a number of analysts are guessing that's the case—then yes, Tesco's Hudl is doomed.

But several things suggest Tesco could do something different. One is the fact that Tesco already offers a highly regarded mobile service under its own name. No, of course Tesco hasn't built its own towers—it uses the network of O2, the U.K.'s second largest mobile operator. But Tesco has access to all the bandwidth it needs at wholesale prices, and the retailer could use that for data services in unusual ways.

Remember, that's been a key element of Amazon's Kindle—the fact that you could use 3G or, before that, the WhisperNet service to download books. In Tesco's case the chain is trying to sell streaming movies and videos through its Blinkbox service, so things might not work quite the same way. But there's a big difference between selling a movie and selling movie-watching anywhere. That second one has much more value to customers.

Of course, that's still based on the assumption that the Hudl really is just to sell more Blinkbox videos and other digital content. (If it were, wouldn't it make more sense to call the tablet Blinkbox too?)

But rumors suggest that the tablet will come pre-stuffed with every Tesco app that the chain can wire into it. Yes, CRM is part of the value proposition there, but Tesco also sells a lots of groceries that are delivered to customers' homes, along with lots of other merchandise that is much easier for customers to see on a 7-inch tablet than on a smartphone screen.

If Tesco can get customers shopping either before or after the movie—or even uses the movie as a reward for shopping ("spend £20 on groceries to be delivered and collect your Tesco points plus any movie to watch right now!")—having complete control of the tablet starts getting more interesting.

There's yet another reason Tesco might want its own name on a tablet, and it's a very practical one: Equipping associates with mobile point-of-sale devices gets very expensive when those devices are iPads, even if you're getting a dramatic discount. Use of iPads or generic Android tablets also presents some security issues when it comes to taking payments. But for most retailers it would just be silly to buy anything but an off-the-shelf device. Customized tablet hardware would be even more expensive than paying Apple full price.

But not if you're planning to sell that same customized hardware to customers as a tablet for watching movies and buying groceries. Then it starts to sound a lot more economical. And the ability to handle contactless payments with on-the-fly encryption and other high-security payment options could justify the cost even in the painful (for Tesco) event that customers just aren't buying it.

Of course, we don't know if Tesco has any plans like these. At this point, the Hudl—if that is indeed its real name—is just a rumor. But for a retailer in the unusual position of Tesco, a tablet of its own might not be quite as crazy as it seems.