It seems that every week brings a fresh tale of woe from the UK’s largest grocer, at all ends of the spectrum. From record losses to property write-downs, to job cuts, to out of date baby milk, it seems to be open season on Tesco right now…. Dave Lewis seems to be kitchen-sinking it to start with a clean slate. And this approach appears to be bearing green shoots. A new brand director, and sales outperforming their rivals. So what of the new, allegedly leaner, keener Tesco?
Tesco 2.0 if you will… We’re promised simplified ways of doing business – from 24 ways of earning margin to three. dunnhumby appears to be set to be taken over by WPP, meaning Tesco’s media portfolio and its data arm will be in the hands of a media giant which owns multiple brand and shopper agencies. And range changes: drastic cuts in ranges are imminent, with the Boston Consulting Group, employed by Tesco, advising on streamlining the range the right way. Undoubtedly the outputs of that will lead to tough negotiations, but ultimately should lead to more shelf space for those that remain, even if some of that freed up shelf space is re-purposed.
Manicure with your frozen peas and choccy biccies anyone? So in the short term, what’s a supplier to do? Below, our thoughts on operating in the new Tesco-yet-discounter-influenced world. Ensure that the newly agreed range and planogram happens. Now is the time to invest in a field team, even for the short term. The quickest way of getting a product archived is if the range review is improperly implemented and you end up with ‘ghost stock’.
Consider shopper research. How are shoppers shopping your new range and the newly defined category? Can they find things? Does the all-new layout confuse, or inspire? If your category has not yet done its range change, consider pre-and post-change research to record the impact of the change, and derive rapid insights for future growth Take a look at your pack architecture, pricing and promotional strategy. Does it reflect the new range?
If you’ve lost lines, consider fighting back. Marketing Week’s excellent article here may provide food for thought. If you’ve lost lines permanently, time to reflect investment balance…. And what of the day to day? The challenge facing retail hasn’t changed. There’s still a tension between big box out-of-town supermarkets, click and collect, online, convenience stores, and the simple, pared down approach of the discounters. Regardless of Tesco’s current troubles, this situation remains….
If you’re a brand owner: Tesco need to attract shoppers to out-of-town supermarkets, and gain footfall and value from this expensive property portfolio. Consider more innovative approaches to shopper marketing - ones that drive interaction and excitement in store, and critically for Tesco, footfall to their stores. Investment in dunnhumby’s instore packages may also be appropriate – they’re certainly market-leading in terms of the amount of brand freedom and visibility given to the brand in the shopping environment. All of which makes Tesco a much more engaging place to shop than a discounter, regardless of pricing.
Think too about online shopping: Are you investing appropriately online? According to Mintel, 20% of UK adults do some or all of their shopping online, yet online shopping accounts for only 5% of sales. With online growing exponentially each year, have you got the basics right? Is your taxonomy correct? Do you know where to get the most bang for your buck when you invest in online banners? Do you know to what extent sampling can deliver for you? How does your category perform in online grocery shops? What innovation (or simplification) can you help Tesco bring to the online shopping experience? Brands that invest in acquiring this knowledge now will reap dividends in the future. There’s no more ‘business as usual’ in UK grocery.
Brands, manufacturers and retailers will ride the recession and discounter-driven storm together. The strongest will ensure their basics are in place, then innovate and thrive. Any complacency is likely to be punished by the market. But the opportunities, for those who choose to make them, abound.