As I looked to the Ghost of Christmas future, I’d be thinking “What an earth now?” as I realised that Tesco could cut prices no further. It has simply cut prices for punters as low as possible, by squeezing suppliers every which way and cutting (then raising again) staff salaries, but to no benefit. Punters don’t notice that prices are significantly lower than Sainsbury’s or Morrisons, because the difference is so negligible, and as such, Tesco are facing a 2012 of declining market share.
This price problem is a key reason why Tesco are losing market share, because it is a brand built around the “Every Little Helps” best price implication, so cannot afford to start losing out on price to its major competitors. Over the last five years, Sainsbury’s and Morrisons have focused a solid amount of resource around building brand personality with ideas of supporting mums on a budget; tasting the difference; buying British; and replicating the local street market, respectively. In contrast, whether this is the reality or not, it appears that all Tesco have focused on is growth – and international growth at that.
There is nothing wrong with international growth (as long as you don’t go down the K-Mart route) and Tesco’s scale is, generally, a crucial competitive advantage.
However, in the years leading up to the boom of online retail, was it really the right move both commercially and PR-wise, to desperately pursue bricks and mortar presence globally? Meanwhile, it has a clunkier web and social media presence than key competitors.
Tesco must realise that now is the time to take lessons from its competitors, including Amazon, seriously investing in overhauling its online retail capability, if it wants to maintain a leading market share (of I’d imagine about 50%) for UK grocery purchases online. It has had a serious advantage in the last five years, due to its scale of brand recognition – largely because of its number of stores – so people looking to do their weekly shop online have automatically turned to Tesco. Now that online shopping is de rigueur, other factors though, such as the ease of the experience and quality of the service, are much more important, which should be worrying for Tesco.
Tesco must accept that people appreciating it (for being close by / low-priced / well-stocked), or indeed admiring it as a British corporate success story, is not enough to make it “future-proof”. It must recognise that the best things to do for the health of the business in the nineties and naughties, are no longer helpful for the decades ahead, namely:
Remorseless focus on price
As competitors have proved, price is only part of the equation (especially when there is nowhere left to go on price, without the terrible PR that would come with squeezing suppliers etc even further)
Growth of store footprint
The web age asks serious questions for those building new stores further and further afield. How valuable will this physical outlets be in ten and twenty years time when even more people do their weekly shop online?
Biggest investment in social responsibility packages of any UK brand, as primary tool to overcome haters
Tesco certainly needs to continue to evidence its role in building a better world – as a largely defensive piece, but it is not a case that by flashing the most cash in this area, it will get the most back from it, either in terms of PR or anything else. It should consider this before a consultant wanders in, suggesting spending extra millions in some grandiose social responsibility program, which might reach the ears of marketers and CEOs, but leave the great British public untouched
So what would I do if I were a Tesco UK board director right now?
a) Take some beta blockers
b) Write a 5, 10 and 20 year plan, forbidding myself to write the phrases “cutting prices” or “increase store footprint” and see what this results in
c) Focus remorselessly on injecting brand personality into Tesco, similar to the way Bolland helped to make Morrisons associated with traditional values and a “northern warmth” in the last few years
d) Invest heavily in the latest online innovations and platforms, ready to rule supreme in the age when brick and mortar are less important in grocery retailing
e) Gather together all the genius data monkeys, strategists and marketers you have working in the organisation, and say:
“We are entering into an age where everything Tesco thought was most important to our success is no longer going to be. An age where Tesco clubcard users think it is creepy thing that we know what sausages they like best, instead of a cool thing. What are we all going to do about it?”
f) Construct a framework for CHANGE (I know that sounds wanky, but working out just how much Tesco needs to change is more important than gung-ho trying to change a whole business culture at once)