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Tesco profits growth thanks in part to a forward thinking app strategy, say analysts

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Tesco has announced its 2017/18 interim results, delivering 3.3% sales growth for the Group, with UK like-for-like sales up 2.2%. And part of its improved performance lies with its app.

According to analysts, Tesco is ahead of the game in the UK with apps and the work it has done on mobile is likely to see it continue to perform well and bring the fight to other grocery retailers.

Derya Yildiz, Senior Analyst, Kantar Retail, explains: “Speed is the new loyalty in grocery and Tesco is making the right moves to secure a bigger share of shopper wallet. While Sainsbury’s tests a checkout-free payment app and Costcutter trials fingerprint payment, Tesco’s new Tesco Pay+ is a much simpler yet effective move.”

Tesco replaced the PayQwiq app with Tesco Pay+, which combines payment and loyalty in one app for quick shopping. Many grocers have apps, but few combine these two functions. Tesco can easily roll out the new app with a short testing phase, winning the basket here and now.

This Yildiz sees as a winner for the retailer, bringing slicker checkout and mobilising its already powerful loyalty scheme in one simple move.

But Tesco can’t rely solely on friction removal from stores as a differentiator. The vast majority of retailers know that they need to reduce in-store friction in order to attract and keep customers on the high street, according to research from Qmatic.

The survey found that factors such as stock availability, waiting in line too long, congestion caused by other customers, and not being able to locate staff assistance, could drive existing and new customers away if retailers cannot improve the in-store experience.

The research, commissioned by Qmatic and conducted by Vanson Bourne, found that 98% of retailers agree that their stores need to reduce friction along the customer journey, with 82% stating that customers demand a “five-star” experience, and will shop at a rival if the retailer in question cannot provide it.

Tesco knows this and is also upping the ante in delivery to get ahead. Says Yildiz: “The grocer extended the same-day grocery delivery service across the UK in Q2 and the service is free to Delivery Saver members, mimicking the Amazon Prime membership. As we are counting down for Christmas, Tesco aims to secure the holiday spend ahead of the season with flash deals in key categories like toys. It’s all about taking a good position against the likes of Amazon and Argos, rather than the rest of the Big 4, to win the shopper.”

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