ResearchFarm’s latest report, “What Tesco Needs to do Now – A Strategic Blueprint for a Better Future,” analyzes four key strategic areas that the UK-headquartered food retailer needs to focus on, namely: Clubcard, hard discounters, on and offline non-food sales, and Tesco’s fledgling 3P marketplace. The report finds that Tesco should double down on its recent innovations and transformation towards becoming an omnichannel leader rather than retrenching from new business ventures.
Daniel Lucht, director of ResearchFarm, said: “While some analysts suggest dumping the hudl or even clubcard and returning to the basics, we think turning the clock back to the 1990s is just not possible. The world has changed and giving up on the long term and the future focus would damage the business beyond salvation. In many ways Tesco’s problem seems to be one of execution, and the timeframe allocated for this, rather than strategic errors, and perhaps all the retailer needs is more time.”
The report’s authors recommend that to restart its momentum in food sales, Tesco should regain the competitive advantage it once had through clubcard and make the scheme relevant for the mobile age (which, to be fair, Tesco is preparing already). This would include widening the scheme to become all encompassing and integrating it with the other business units from the bank, Giraffe, the content streaming business to the up coming phone, and then perhaps by opening up its profiles and customer data to other businesses, as the marketplace operators do.
The analysis also finds that historically price wars have not worked in other markets in slowing down the hard discounters. Price wars have only resulted in deflating the whole market, destroying margins and taking sales of direct competitors. The discounters are usually not affected much (as evidenced by their strong growth rates over the decades). Any hypermarket operator will be unable to compete with a focused, limited range EDLP hard discounter on a cost basis, and Tesco’s best course of action will actually lie in stopping the likes of Aldi and Lidl from expanding, which means buying up the best convenience sites.
Daniel concluded: “We would not bet against Tesco and its transformation. The pressures felt now will be felt by every player in the market, and it is obvious that when radical change happens the market leader is the biggest sitting target and will hurt the most first, at least initially. That said, Tesco is still the most innovative retailer in the UK, with a great culture of backing innovation and very talented people working there. There is no magic silver bullet or simplistic solution, but a concerted effort of many various individual initiatives will deliver results, even though it may well take a while. If these initiatives are joined up, they will help Tesco to maximize the customer profitability of its loyal shoppers and make the retailer ready for the next decade.”
For more information about the Tesco report, contact the publisher by phoning +44 7708961419, or sending an e-mail to louise@researchfarm.co.uk.
