Tesco muscles in on digital market

Tesco Digital - which the grocer launched in April last year, promising "a one-stop shop for everybody's entertainment needs" - is to be overhauled in an attempt to make the site a destination for younger shoppers buying entertainment.

Tesco confirmed the relaunch will take place this autumn. A spokeswoman said the entertainment site on Tesco.com will "bring together for the first time our physical and digital offering into one new-look and easy-to-use site".

The relaunch will enable shoppers to buy both downloads and physical CDs in one basket, which has traditionally proved difficult for retailers to master.

The revamped site - masterminded by entertainment category director Rob Salter - will also feature customer interaction elements thought to include social networking, gaming and blogs. These could be added after the site goes live.

Tesco is also understood to be in talks with music companies to broaden the site's range, although the spokeswoman refused to comment on "commercial discussions".

Tesco denied the relaunch was designed to take on retailers such as Apple. The spokeswoman claimed that the grocer was "developing our new entertainment site based on our customer feedback, not what other retailers offer".

However, one source said the existing entertainment site had not been as successful as the grocer hoped and it was keen to tap into the customer segments of specialists such as HMV.

Mintel head of European retail Ben Perkins said: "Tesco has gone into entertainment because of the huge consumer interest, but the overlap between the customers who are interested in this market and the traditional Tesco shopper is very limited. This area is all about brand and brand perception, and therefore it's easier for the likes of HMV or Apple to attract customers."

The site is expected to be linked to Tesco's loyalty scheme, Clubcard. Perkins said: "Using Clubcard could give Tesco an edge but the younger market is not as price sensitive as other areas, so solely using a pricing tool won't work. Tesco has its work cut out in developing a brand younger consumers want to use but it certainly has the funds to do it if it is pitched right."

Tesco is also preparing to relaunch clothing online next month.