Tesco has been subjected to a flood of negative press and media comment since Terry Leahy stepped down as CEO. This week there have been a couple of reports that provide some useful insights for independent retailers.
The latest bad news comes from figures by Kantar Worldpanel, which show a 4% drop in sales over the 12 weeks to 17th August.
Retail analyst, Bruno Monteney, has had plenty of time to consider Tesco’s plight as he worked for them for 10 years. He has been looking at one of Tesco’s biggest problems – having the same pricing policy for every Tesco supermarket across the country.
His solution is that Tesco needs to have three different store formats with differing pricing and ranging policies. One for affluent communities, a discount chain for deprived communities (and looking at the success of Aldi that can be almost anywhere) and a standard offer for communities in between. Match range and price to the needs of target customers.
He says: “Splitting themselves into different channels would allow them to use different strategies with different customers. Rip out 20 per cent of the range, have cheaper shelving and cheaper products in the more deprived areas and give customers a better deal. In London, where people want someone behind the counter who knows the difference between a parma ham and a serrano ham, requires more investment.”
In a Metro store in Hammersmith’s subway, Tesco has unveiled its first reduced range that focuses on commuters and shoppers on the go. A Tesco spokeswoman said: “This is the most ultra convenient store we have yet rolled out.”
The lesson for independent store owners to take from this is that your range, pricing and promotional strategy must match your customers’ needs. You may not have the data collecting capabilities of Tesco, but you can talk to all your customers much more easily than Dave Lewis, Tesco’s in-coming CEO.