Customer Focus

Tesco: how customer focus contributed to rising sales

Tesco [IRDX RTSC] this week announced growing sales following a strategy closely focused on putting both the online and store channels at the service of the customer.

Tesco revenue of £55.9bn in the year to February 25 was 3.7% up on the same time last year, when currency fluctuations were taken into account, or up by 0.8% in constant currency. UK like-for-like sales, which include online and also strip out the effect of store openings and closures, rose by 0.9% – the first full-year growth reported since 2009/10. Food like-for-like sales rose by 1.3%. Profits before tax and exceptional items came in at £1.3bn, 29.9% up on the same time last year (or 24.9% in constant currency), but when exceptional items of £245m related to Tesco’s agreement with the Serious Fraud Office and Financial Conduct Authority following the discovery of a black hole in its accounts, were discounted, pre-tax profits of £145m were 28.2% down on last year (or 39.1% in constant currency).

Here are some of the key points that struck us as we looked for clues towards its multichannel approach.

The customer
Tesco said that the price of a typical basket of food had fallen by 6% since September 2014, while discounts accounted for a lower proportion of sales (32%) than previously as “we made a conscious decision to focus our investments on sustainable improvements rather than on short-term couponing and promotions.” Availability improved following a 24% reduction in the range in order to create a “simpler” offer. Tesco said that it saw improvements in key customer metrics “including colleague helpfulness and availability, where performance reached record levels.”

Digital innovation
Its PayQwiq smartphone-based digital wallet is used once every five seconds. Users of the PayQwiq payment service download the app from the App Store or Google Play, link their card details and then shop in store using their phone. When they reach the till, they open the app which generates a barcode that they scan to pay. Clubcard points are added automatically.

Crosschannel
Tesco said it optimised the mix of its offer across channels and products.

Chief executive Dave Lewis said: “Today, our prices are lower, our range is simpler and our service and availability have never been better. Our exclusive fresh food brands have strengthened our value proposition and our food quality perception is at its highest level for five years. At the same time, we have increased profits, generated more cash and significantly reduced debt.

“We are ahead of where we expected to be at this stage, having made good progress on all six of the strategic drivers we shared in October. We are confident that we can build on this strong performance in the year ahead, making further progress towards our medium-term ambitions.

“On top of this, our proposed merger with Booker will bring together two complementary businesses, driving additional value for shareholders by realising substantial synergies and enabling us to access the faster growing ‘out of home’ food market.”

Mentioned in this piece…

Tesco

Tesco

IRDX: RTSC

Tesco is the largest British supermarket chain. Tesco has a comprehensive multichannel offering, including mobile and tablet websites, click-and-collect options and home delivery. (more…)

Image credits:
  • Image courtesy of Tesco

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