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World number three retailer Tesco has had a bit of a bumpy ride this year with poor sales leading to a profit warning that hammered their share price. Not a happy first year for Terry Leahy’s replacement as CEO, but Phillip Clarke has overseen an action packed response to the Tesco’s disappointing performance.
The actions that Tesco have been undertaken since the profit warning are of interest to any retailer. In the UK they have increased staff for fresh and beers, wines & spirits categories and increased training for staff. In the USA they have looked at each of their stores and cut trading hours and staffing where trade does not justify the costs. They have also trimmed head office costs. They have included their Chinese operation in this performance review and are closing 4 hypermarkets. They have also been looking at how they can deliver digital media and have purchased we7 for music delivery and Mobcast for books.
What should you be getting out of the exercise that Tesco has undertaken this year? The key is that they are looking at a profit recovery. They have been looking at every aspect of their company and asking the question, is this part of our business meeting our profit expectation? They are then taking action to deal with the parts that are not.
For independent retailers who only operate one store there is the same question, are all parts of my business profitable? Is each category, bay, shelf or product making the profit I want? For most independent retailers this may be an impossible question to answer because they don’t have a business plan and don’t set a budget to assess success or failure by. Or they don’t look at their sales and profit data from their EPoS system (that’s if they have one).
Analysing your business is one of the keys to success, knowing which product makes you the most profit and those that don’t will help you drive your bottom line. Be assured Tesco have upped their game in this area since their profit warning last year. You can do the same.