Tesco Q1 - What's been happening? (4 June 2014)
4 June 2014
Core differentiation is the key, don't 'out Aldi', Aldi. The above image from Lincoln Extra showcases where Tesco are strong, the 'digital world'.
It is getting a bit beyond parody, with Philip Clarke looking like a 'hip' CEO by talking about IT all the time and shifting roles to emulate a small tech start up with 'chief creative officers' within the mix.
The future is important, and Tesco are within that arena strongly, but the core stores and supermarkets are what continue to frustrate customers, investors and colleagues alike.
Within the price arena, Price down & staying down has been a success. Volumes on these lines is up 28% which is great, however with lower prices, you have to sell more.
My focus is always on core, unrefreshed stores as these typically make up the 'rump' of the estate and can be a good indicator of what's going on in reality.
New store openings are great for the 'wow'. Lincoln was a fantastic model and could be rolled nicely, however in the north - Bradford stores are typically quiet.
Standards are so variable, it's untrue. In some respects, there are decisions that in no way are beneficial to the customer. Around Easter, one store had these on sale, at £7.
This trading quarter also saw the Easter period, and despite a better exit plan in terms of reductions after the event, there was still evidence of significant over buying from the centre.
Retailers still believe people do a full trolley shop (including H&B) within their stores. They don't, they go to variety stores / Home Bargains.
Similarly, they continued to go to Aldi this year at Easter, as the discounter struck a chord with their campaign.
Eggs wise - 1D were clearly a challenge this year, across the business but when Poundland trade off a similar egg, customers won't be fooled anymore.
Let's not even go there with the Guinness Egg / Thorntons mountain, both of these lines (along with others) were significantly marked down to clear.
Exiting 'clean' is always a priority for retailers, Sainsbury's are masters at it. They left Easter with a few of their OL eggs left, which were reduced on Good Friday which saw a number picked up ahead of Easter, minimising loss.
Tesco held for too long, and as a result they built inventory levels, especially on Thorntons (built over several seasonal periods) which became a running joke on Twitter regarding the sheer levels of stock.
As discussed in a previous email, there was evidence of a lot of supplier cash in play. PoS can be expected to be placed ahead of big trade driving events, such as the World Cup for example.
Mid April saw a lot of PoS dotted around the store, does this help customers? Or is it just easy money from the supplier?
Store standards are always a good gauge of how things are going, consistency is so difficult to achieve given that stores go the length and breadth of the country.
However, there are some areas where 'accepting the unacceptable' shouldn't be tolerated. There is a lot of noise on Twitter about Produce and the 'academy' training that is currently ongoing.
Clearly, Tesco want to differentiate themselves on Fruit & Vegetables and this makes sense. Produce is a 'hero' department and a gauge of freshness to customers.
Poor prioritisation on the department here, some areas were packet perfect, with others looking like the above.
Typically, customers will say that Bakeries are another good gauge but those stores in the South / South East are currently seeing theirs change to a 3rd party operation under Bakery Project / Euphorium.
It'll be unpopular in stores with further changes and adjustments to hours, redundancies and restructures.
However it's the right thing to do for the business, profitability has to be a primary concern and with a rumour that Tesco Bakeries have gone from £18m profit to becoming loss making, it's a no brainer.
In addition, the work from Bakery Project looks really good too.
On a final note, a good area to check when out in stores is the Grocery clearance area. It's a veritable dumping ground for open packets, short dated Grocery stock and everything else.
It requires management walking around and seeing things, no one saw this. A disaster.
I visited this store in April 2014.....
Consistency is hard to achieve, but management must be proactive, this is huge build up issues and has been missed by countless visits, walks and replenishment teams.
It has to be someone's responsibility.
I note that these instances are much reduced in comparison with the older days, but they still happen far too regularly. Customers shopping in store are vital, the good operation of stores is vital, availability from those stores directly feeds into .com availability.
Whilst Tesco focus on the online customer; with apps, Hudl, blinkbox and delivery saver. They need to remember the 'bread and butter' superstores, their customers and indeed the 'offline' customer.
From the Grocery Insight newsletter archive, first sent to subscribers on 4 June 2014. Steve now writes at read.groceryinsight.com. See also the blog archive and briefings.