Tesco, a rediscovery of good shopkeeping…?

Essentially, the future of Tesco lies in global retail, with profitable dominance of its home market a pre-requisite..

However, a market share of more than 25% of food becomes a political issue, attracting the normal criticisms of ‘abuse’ of power over suppliers, planning authorities and even the consumer in terms of real choice.

Achieving and potentially exceeding 31% in the UK had to present a problem for Tesco, despite attempts to generalise its offering via non-foods, thus allowing it to claim an ACV share of 12%, well short of the problematic 25% threshold….

Meanwhile, the rush for overseas growth caused them to miss some tricks in the UK.

‘Black Thursday’ was simply a massive correction, and a recognition that savvy shoppers want value instead of more choice i.e. via improved quality, range and service, in a flatline market environment, on the brink of another recession.

The issue of superstore overcapacity is an important side issue in that the growth of online non-food means less physical selling space is required, putting more pressure on selling intensity (sales per sq.ft.) of remaining SKUs. Given that it would be virtually impossible for other retailers to match Tesco’s space productivity via alternative use, then ‘spare’ superstore sites will be difficult to sell off. This means that these and underutilised stores will thus become a continuing drain on profits…

Unfortunately all of this this means Tesco and its suppliers will have to share the cost of £300-400m for the change, or risk wiping out this year’s profit growth for the No.1 retailer…

The way forward for UK NAMs is to assess degrees of congruence between brand consumer-profile and Tesco shopper-profile, map out Tesco’s appeal vs. other retailers from the consumer-shoppers’ point of view, and position their brands as ways for Tesco to improve quality, range and service, better than the opposition.

It hopefully goes without saying that calculating and demonstrating the financial value of the brand to the Tesco P&L in return for 100% compliance has to be pre-requisite for both parties in making this change, like never before…