Retail review – Tesco - Emma Robertson, Managing Director, Transform – Retail Strategy score 25/25 (IRM 54)
It’s an interesting time to be looking at Tesco’s multichannel strategy. The business is one in flux, arguably undergoing the most change it has seen in the last 20 years. Between writing this review and the publication date there will no doubt be more change and although there are hints as to where the current strategy will take them, the picture is far from clear.
The emerging picture is of divestment and consolidation colloquially known as getting back to its knitting. Tesco has fallen from a great height. Not just commercially but also in the loss of brand affection and customer loyalty; moving from a loved British brand to a behemoth we love to hate. To reverse and reset this position Tesco is exiting from markets and propositions at the periphery of its core business instead concentrating on getting back to doing what it does best, and being the best at it.
Less than a year ago, Phillip Clark’s digital strategy involved ongoing investment in communications and media markets, with the launch of Hudl2 designed to further accelerate the growth of its on-demand TV service BlinkBox. Less than 6 months later Hudl is stalled and both Tesco Broadband and BlinkBox have been sold to TalkTalk.
Similarly, another strategy to invest in Café and Restaurant chains in order to attract shoppers has also failed. Although both Harris + Hoole and Giraffe remain in the group, the Director in charge of them has exited and recently the founders of H&H declared they would be exiting management, although retaining their 51% stake. The venture has not worked out well for Tesco either. Accounts to the end of Feb 2014 showed H&H as £13m loss making.
Perhaps the strategy that has been on the slide for the longest time – internationalisation – is also now under the microscope, with Tesco Korea in the process of being sold off. The future of One Stop, Giraffe and Dobbies in the UK remains unknown and uncertain.
At the heart of these exit strategies is a commercial question around what Tesco needs to own vs. what it can offer its customers on a franchise, partnership or client basis. The mooted sale of Dunnhumby is an example of this. Tesco is not pulling back from its 16.5m Clubcard users or the data it provides but with a price tag estimated at £2bn does Tesco need to own what is now largely a standalone business in order to benefit from a retail CRM programme?
Tesco would also benefit from focusing more attention on questions around customer experience and expectation. Where does Tesco have genuine brand permission to play, and how easily can the proposition be integrated into a single customer experience?
Recent digital developments tell a similar story but with more focus on the core grocery proposition. Some interesting innovations generated a lot of coverage and excitement but presumably failed to impact the bottom line significantly: QR code scanning at airports and the Tesco grocery app. The app is often held up as a leading example within the market with its barcode scanning and persistent list building adding to the usability and repeatability, especially when combined with £1-one-hour delivery slots.
Digitally, Tesco has talked multichannel for a long time, but hasn’t been able to make the seamless links between channels and propositions work from a customer perspective. In fact, over the past 5 years new ventures and propositions have made it harder rather than easier to join up the experience. At a fundamental level, the grocer fails to join up sales of grocery and non-food product; the customer proposition at the heart of the launch of Tesco Direct back in 2006. If you then add in customer expectations around Tesco mobile and Tesco bank, also not connected digitally, the customer experience of dealing with Tesco as an organisation decrements more.
Now it’s important to be realistic. No-one is yet delivering on this nirvana of seamless integration, and certainly not within a business as complex as Tesco. The point is that if focus and consolidation are the heart of the new strategy, then Tesco’s digital strategy would do well to echo it. Creating excellent, effective and expectation beating experiences across its core business would be transformational for both the market, and the retailer’s fortunes within it.
The simple scoring from Transform is based on whether or not five services are offered by the retailer in the UK with a score of 0 for no and 5 for yes. On this basis, Tesco scores 25/25.
Collection in-store: Yes
Mobile app: Yes
Mobile web: Yes
iPad app: Yes
In-store tech: Yes