Tesco changes - night shift under threat?
5 December 2016
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Tesco look well set for Christmas and we'll review as we swing into the Christmas reviews over the next couple of weeks, we will see that their performance should continue to improve given their offer and also execution in store.
In terms of execution, part of their work around range resets and pushing own label to the forefront of the merchandising plans has been to preserve availability in store.
Of course it's fundamentally about growing volumes to improve the price point and get on that virtuous wheel of health where volumes grow, prices cut, volumes grow futher thus driving the margin forward.
They're in a decent place and the range work has been solid, a real learning for retailers worldwide really. How to drive a failing retailer into one that has a cohesive strategy to take on discount whilst also harnessing their own strength and pushing along with their own offer too.
The danger of competing in the market is that you become obsessed with looking out of the window at everyone else, taking the focus off your own points of difference and just becoming a little 'me too'.
There has be an acknowledgment on the competition, of course learning from the good ideas whilst maintaining your own points of difference is entirely right. Tesco realised that to push on with their differentiation and appeal, they had to ensure that the own label was the focal point of any push as they can then control their own fortunes.
The Tesco label is of course exclusive to Tesco and focusing on this range means they can control much more than a focus on branded products.
Branded items are done well by Asda, particularly on promotions so the brand guarantee takes care of this, instant discounts are powerful, but expensive. It's a 100% redemption rate.
So with the wider proposition taken care of, it means that Tesco are able to add a layer of their strength on top of the offer, promoting own label lines on ends but also in fixture.
Gone are the days of Hellmanns getting the best space on shelf, now it's firmly below the Tesco equivalent range which sits in the prime 'eye level is buy level' territory.
In addition; there is lots of space given over to the own label ranges across the store - some ends can be own label dominated with others featuring a mix of own label and branded lines.
Not typical, the commercial income hungry days of old saw Tesco flog their ends to all and sundry irrespective of deal strength. This also saw the aisles turned into a branded gallery of all kinds, adding no value at all to the shopping trip.
One only had to look at Cheese to see how the pendulum has swung, branded Cheese is placed to one side in one bay. Two bays of own label Cheese dominant in the category there.
Branded in this category is purely high/low - the focus is on deals and one would imagine there is a fair bit of cannibalisation too.
Customers switching in and out of brands based on where the best deal is, not necessarily out of brand loyalty. So moving the focus to own label to grow share and drive better value for customers is smart from Tesco.
In terms of areas that don't justify their space; given that space is now better managed, with less range but more space for the lines that do sell, thus driving better availability for customers...
Brand outlet looks to have a major question mark over itself.
What is the purpose of the range? Well, in the early days it was more about the Tesco obsession of trying to take on everyone, each store that was near a Poundland or Home Bargains received a brand outlet range with generic lines at £1 or so to combat the value discounters.
Of course sorting out the core offer was perhaps beyond Tesco at this point, so dropping an aisle full of lines that in some cases, contradicted the core value message in aisle was perhaps symptomatic of the issues that plagued Tesco pre Dave Lewis.
But now, given the improvement in price perception, availability and own label prices relative to discount. Does Brand outlet have a place in the wider Tesco world?
It does take up space in the larger stores, but the offer isn't relevant to what Tesco are trying to do. The lines are generic, tertiary labels and customers shopping in Home Bargains (et al) weren't doing so because Tesco didn't range the products.
They were shopping there because Tesco was poor value on so many lines. So, one for the consideration pile in 2017 perhaps.
Given the better availability picture, it was noteworthy perhaps that a couple of local stores have started the arduous process of moving their aisles about to accommodate an empty bay in each aisle, for a cage to enable filling in the day.
Filling in the day is expensive so Tesco shy away from it along with the other retailers where applicable, the work undertaken on ranging has improved availability too.
So why have these bays popped up? It's a nice way to save space but ambient lines in these bays isn't exactly a space drain.
Around 90+ shops have lost their night shifts as of early November, these are low balling stores. Not justifying their night crew with lower volumes and sales.
However this store is a reasonable taker and indeed is also an Extra store, why would this work be undertaken so close to Christmas?
Especially since not so long back the store was re-merchandised to allow international ranges of cuisines to merge together.
Addition of such bays may well only add fuel to the fire that further night shifts are to be reviewed in the new year, of course there is a significant cost to running night shifts anyway. That's without the living wage coming in, which for a business the size of Tesco becomes a major issue in the days of lower margins.
Whilst consistently good for some 18 months or so, Tesco should tread carefully. Night shifts are vital to the operation of a good store, so removing in stores that trade reasonably well could leave things a bit tight - which then leads to a customer impact.
The addition of these empty bays is one to watch; unclear how far any changes in the night shifts will go in terms of store profiles... Very busy stores would surely need to retain a night crew just to recover the store and maintain availability?
But change looks like it's incoming, the fact that 90 or so stores lost their night crew just before Christmas shows the confidence that Tesco has in their own operation.
But beware, consistency has been hard won and is easily lost.... The night shift change (if it is to be extended) could impact the one group Tesco don't want to impact - the customer......
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From the Grocery Insight newsletter archive, first sent to subscribers on 5 December 2016. Steve now writes at read.groceryinsight.com. See also the blog archive and briefings.