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  • Writer's pictureNick Bonney

Counter Intuitive - Has Tesco Gone Me Too?

Updated: Nov 30, 2022

It’s been a bit of an up and down time for Tesco recently. In the run up to Christmas, two of its former directors were acquitted of fraud at Southwark Crown Court and, closer to home, Tesco announced its 12th consecutive quarter of sales growth with an impressive 2.2% like for like sales growth over the Christmas period. Recent acquisition Bookers has also continued its strong performance with 8.2% like for like growth (Excluding tobacco) over the Christmas period.

On the brand front too, it seems things are looking up. Tesco has finally found a formula which it has been able to use on a consistent basis with Food Love Stories enabling them to execute product led advertising but delivered through a consistent brand platform rooted in emotional stories. The However you do Christmas campaign (a twist on this similar theme) also seems to have tracked reasonably well according to results published by the likes of YouGov and System 1. Dave Lewis it seems has got the tanker turning and heading in the right direction.

2019 however got off to a rather inauspicious start with the announcement of some 9,000 job losses. The charge of the discounters has been unrelenting (Aldi and Lidl now capture more than 12% of the market according to Kantar) and Tesco needed to respond by stripping out £1.5bn of costs. The pressure doesn’t just come in the form of market share growth – both Aldi and Lidl ranked in the top five of the recently released YouGov Buzz Rankings. Consumers are clearly talking about the great deals on offer.

A read through the detail of the cost-reduction announcement reveals the usual nods to cutting Head Office costs in the announcements but more interestingly also the decision to close food counters in 90 stores and run some of the counters in the rest of the estate on a flexible basis. Tesco is undoubtedly is a data-rich and a data-led business and I’m sure there has been a lot of analysis behind why these 90 stores have been selected but have they scored an own goal in the decision to eliminate counters?

Image Inigo de la Maza (Unsplash)

It is, of course, easy to make a logic-based case on why the counters had to go; more consumers are cutting down on meat consumption, an increasing number of us are choosing to shop online and the key competitive threat in the market comes from brands which focus far more on everyday low prices than these ‘value-added’ elements in their proposition.

However, at a brand level, the decision seems counter-intuitive (sorry the pun had to come back at some point). I wrote last week about how the cinema chains had brought richness back into their offering to attract bums back on seats; by taking counters out, is Tesco at risk of swimming in the other direction.

Aldi in particular have become known not only for delivering great value but also those surprising ‘finds’. Asda does great deals for families looking for a branded shop. Tesco itself has introduced its own response to the discount through the launch of Jacks. Surely this was a time for Tesco to be able to differentiate on the main brand and stand toe to toe against Sainsbury’s (bringing theatre with Sushi counters etc) and a resurgent Morrisons (heroing fresh produce in Market Street)?

Furthermore, with our shopping habits changing (shopping across more brands in the category in smaller shops), one of the key challenges is getting customers to spend more per visit whilst they’re in store.

So why would a market leader in Tesco’s position be looking to scale back on the face to face service? I’m sure that the driver analysis will say that it’s simply not an area of the experience that shoppers’ value. Herein lies one of the pitfalls of key driver analysis – all too often its executed in a way which focused on the way the market is structured today rather than the way the market could be structured in the future. Challenger brands are often the ones that manage to create a need rather than trying to replicate the market leader – attributes can shift on the importance axis not just the performance one!

Many categories over the years have suffered from the ‘me too’ phenomenon. Having worked in the mobile industry for over a decade, I can recall a couple of period where, in the face of intense competition, we all fought to match each other’s offers. Unsurprisingly, in the face of little apparent differentiation, shoppers defaulted to the differentiator they know best – price. In that market it took new brand launches (e.g. Orange or O2) or, more latterly consolidation (i.e. the merger of Orange and T Mobile) to create a step change in the proposition.

The danger is that, in trying to respond to an intense competitive threat, brands start to converge rather than differentiate and lose their distinctiveness as a result. Toys R Us is one of more notable recent examples; all the PR at the time of its demise would have us believe ‘that no-one buys toys in store any more’, ‘You simply cannot compete with Amazon etc ‘. Yet at the same time brands which have focused on core principles of in store retailing – friendly service, knowledgeable staff, good core product range etc have succeeded in the very same category. The Entertainer released Christmas results with like for like in store results up 13% and Smyths Toys continues to expand with 200 stores now in it’s estate across Europe.

Peter Jones - Reinventing a Specialist Retailer

Perhaps when generalists are getting caught in the middle, shoppers do still see a value in retailers with a distinct slant to their proposition?! So, it’s interesting to see that in the midst of the recent retail carnage, a brand trying to re-invent itself whilst focusing on what makes it unique. Peter Jones was the guardian angel who saved Jessops from the ashes back in 2013. It’s been fascinating to see both him and Neil Old talk in recent months about how they are trying to revive the business. The focus on expertise, on generating passion within the team is a common theme which they both mention frequently as is the need to adapt to an ever-changing market around them.

In the long run, Dave Lewis may well have pulled off another masterstroke by trimming excess fat from the business (and I may rue the day I wrote this!) but personally I’d love to see a real focus on what makes Tesco distinct rather than trying to play the discounters at their own game.


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