Tuesday, 24 April 2012

Tesco Recovery Plan - Not Radical Enough

Following January’s shock profits warning Philip Clarke, CEO of Tesco, has set out what he will do to restore growth to the UK, and one is left with the feeling that a player with nearly a third of the market, and nearly twice as big as its nearest rival could have come up with something more imaginative.  

The main planks of Clarke’s plan are:

 Sharper prices

More staff to keep the shelves filled

Better quality products

Nicer looking stores

Clearer marketing messages about why shoppers should choose Tesco over the competition

Easier shopping over the internet including the chance to order on line and pick up in store

Less store openings

It is difficult to argue with any of this, but reaction has been tepid, the general view being that Tesco have underestimated the how difficult it will be to get back on track at a time when their competition is being uniformly successful.

Clarke has admitted that Tesco has lost touch with its customers, and is now committed to getting them to love Tesco again. He is aiming for warm and cuddly versus cold and hard.

 However, scale does not have to be bad. Used wisely scale confers terrific business advantage. Philip Clarke could have seen scale as a power for good and used it to provide exciting plans that really would make a difference to Tesco’s growth prospects.

Tesco’s scale means they employ more people, and so have a bigger net from which to catch the truly talented.

They have bigger research and development budgets which should mean market leading innovation in products and services

They have huge marketing budgets which gives them the chance to communicate to more people, more often and through more channels.

 They have unparalleled purchasing power which they could use to support suppliers in return for lower prices rather than just bully.

So Tesco could have faced the world last Wednesday with a commitment to using scale to do good. They could have announced bigger budgets for research and development, a revised innovation process to get new ideas to market more quickly, a new supplier code of conduct, and even a deeper drive to provide the pricing and value that hard pressed shopper need in the current difficult economic climate. Instead we got a standard list of actions that every other supermarket is implementing.

What Philip Clarke’s announcement lacked was an overarching view of how Tesco could be made different and special again, so that customers do indeed find that shopping in Tesco delivers what they seek, if not an experience that they will love.