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    NONFOODS: Nonfood Category Management: Tesco vs. Microsoft

    The U.K. retailer has already stood up to the Bentonville behemoth -- now it's going after Gates & Co. with a raft of private label home and office software products.

    While U.S. retailers are developing new ways of tailoring their store-brand offerings to meet consumers' needs (see the cover story of the Nov. 1 issue of Progressive Grocer), London-based chain Tesco has just raised the bar again, with its October launch of a suite of software products for home or office use that competes directly with many products from Microsoft.

    Tesco Complete Office, for example, is the type of software bundle made famous by Microsoft Office, the pricey package that runs on more than 90 percent of all PCs worldwide. Tesco is apparently looking to eat into Microsoft dominance, at least in Europe. (Attempts to contact Tesco for more information about its distribution plans for the software were unsuccessful.)

    Security, too

    In addition to the office suite, the grocer's new software line includes two security/antivirus products, a personal-finance application, a CD-/DVD-burning tool, and a photo-editing feature. Each title sells for under 20 pounds, or just over U.S. $38. In contrast, the new Microsoft Office Standard 2007 suite sells for $399 -- and that's the second-lowest-priced version of the product.

    The retailer, which began selling the software earlier this year on its Web site, says it plans to have the products available chainwide by the end of 2007.

    "With more people working from home and schools, encouraging greater use of IT, the demand for home computing equipment is bigger than ever," says Tesco buyer Daniel Cook. "Customers can now access a wide range of good-quality computer hardware at amazing prices, but when it comes to software, there is little choice and prices are high. Our new range of software changes this, bringing choice and value to the market that has offered little of either for too long."

    Tesco is no stranger to taking on massive American corporations -- it has successfully held its ground against Wal-Mart's ASDA division in the United Kingdom. Tesco is a newcomer to the software business, which is a different animal from retail. But one thing's for sure: If Tesco is successful, its brand could become ingrained in its customers' minds in a way that's hard to match.

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