This is the third in a series of retailer specific store visit based posts that came from my recent trip to London. Tesco is a global grocery and general merchandise retailer headquartered in Cheshunt, United Kingdom. It is the third-largest retailer in the world measured by revenues (after Walmart and Carrefour) and the second-largest measured by profits (after Walmart). It has more than 5,380 stores in 14 countries across Asia, Europe and North America and is the grocery market leader in the UK (where it has a market share of around 30%), Malaysia, the Republic of Ireland and Thailand.
My first impression of the large store was familiarity, unlike some of the other retailers which I walked this big-box looked and felt remarkably similar to a US grocer, with a uniquely British twist. Their Private Brand portfolio strategy is in all likelihood the most copied in the world; they have a full-evolved three-tier system with Banner brand plus a sub brand calling out other categories. The introductions of venture brands like Chock-a-block providing a welcome antidote to both the Private Brand products and the national brands. Tesco also features Technica a Private Brand for home electronics.
More often than not the package design is impressive and exercises a distinctly British restrain that American Private Brand manager find difficult. As with American retailers there are plenty of poorly designed or simply mediocre packages.
According to Citigroup retail analyst David McCarthy, “[Tesco has] pulled off a trick that I’m not aware of any other retailer achieving. That is to appeal to all segments of the market”. One plank of this strategy has been Tesco’s use of its own-brand products, including the premium “Finest”, mid-range Tesco brand and low-price “Value” encompassing several product categories such as food, beverage, home, clothing, Tesco Mobile and financial services.
Tesco like Harrods from yesterdays post is a store you must walk. A store that embraces brand and engages customers. The following is an excerpt from their branding documents, have you done this work?
In 1997, Tesco set out a strategy to grow the core business and diversify with new products and services in existing and new markets. This strategy enabled us to deliver strong, sustained growth over the past 14 years. We’ve followed customers into large expanding markets in the UK – such as financial services, general merchandise and telecoms – and new markets abroad, initially in Europe and Asia and more recently in the United States.
In order to reflect changing consumer needs and the increasingly global nature of our business we’ve evolved our strategy. The strategy now has seven parts and applies to our five business segments – the UK, Asia, Europe, the United States and Tesco Bank.
Our seven-part strategy aims to broaden the scope of the business to enable it to deliver strong sustainable long-term growth.
- To grow the UK core
The goal ‘to grow the core UK business’ is as relevant today as it was in 1997. The UK is the largest business in the Group and a key driver of sales and profit. There are many opportunities for further growth and so we will continue to grow the UK core.
- To be an outstanding international retailer in stores and online
Another of our original goals was to be a ‘successful international retailer’. In 1997, our international businesses generated 1.8% of the Group’s profits. Today they represent 25% and we’re now either number one or number two in eight of our 13 markets outside the UK. So we’re already ‘successful’. Our next step is to be an outstanding international retailer in stores and online.
- To be as strong in everything we sell as we are in food
In 1997, we were largely a food retailer so we set ourselves the challenge of becoming ‘as strong in non-food as in food’. As our business has grown and we offer an ever wider variety of products to customers, the term non-food no longer does justice to all the products and services we sell. We now aim to be as strong in everything we sell as we are in food.
- To grow retail services in all our markets
Our services businesses have come a long way since we first included in our strategy the desire ‘to develop retailing services’. Today these parts of Tesco generate £583 million profit, representing 16% of the Group total. To date this has been largely UK-focused, but as many of our international businesses have now established well-known brands in their local market, it is time to expand our ambitions and aim to grow retail services in all our markets.
- To put our responsibilities to the communities we serve at the heart of what we do.
In 2007, we added a fifth element to our strategy to underpin our commitment to communities and the environment. We’ve updated this objective slightly by emphasising our responsibilities in these areas. Our goal is to put our responsibilities to the communities we serve at the heart of what we do.
- To be a creator of highly valued brands
The first is to be a creator of highly valued brands. Our brand has evolved from a logo above a few stores in the UK to a multitude of store, product and service brands across the world. Building brands gives our business more meaning with our customers. On one level, this relates to our Retail brands such as the Tesco brand itself, but it also refers to our Product brands such as F&F and Technika and our Pillar brands such as Finest and Value.
- To build our team so that we create more value
Our final goal is to build our team so that we create more value. As our business continues to grow and diversify we need more leaders to run the many substantial business and support functions within the Group. Our leaders not only have an important role today, but also have a responsibility to help build a bigger and better team for the future.
Our vision is for Tesco to be most highly valued by the customers we serve, the communities in which we operate, our loyal and committed staff and our shareholders; to be a growth company; a modern and innovative company and winning locally, applying our skills globally.
In May 2011, we launched our four-part vision for the future of the business. We would like Tesco to be seen as the most highly valued business in the world. Valued not only by our customers, but also by the communities we serve, our staff and our shareholders.
We are, and we will remain a growth company. We will continue to pursue growth in all parts of the business – in the UK, internationally, in services and across general merchandise, clothing and electricals.
We will be a modern and innovative company. We’ll stay ahead of the curve, anticipating changes and adapting for the sake of our customers and staff.
We will win locally by applying our skills globally. The key word here is ‘locally’ – all retailing is local. But increasingly we are utilizing the skill and scale of the Group to benefit the performance and competitiveness of each of our businesses around the world.
The Tesco Values sit at the heart of our business and help us deliver our core purpose – to create value for customers to earn their lifetime loyalty. Our Values are – no one tries harder for customers and treat people how we like to be treated.
No one tries harder for customers:
- Understand customers.
- Be first to meet their needs.
- Act responsibly for our communities.
Treat people how we like to be treated:
- Work as a team.
- Trust and respect each other.
- Listen, support and say thank you.
- Share knowledge and experience.
…so we can enjoy our work.
The Values were developed in 1997 from discussions with thousands of staff on what they thought Tesco stood for, and what they wanted the business to be. Ten years later, our staff refreshed the Values to reflect the business today and how they wanted to work in the future. These were re-launched across the Group in 2009.
Our success depends on people: the people who work with us and the people who shop with us. Whether in Ireland or India, Turkey or Thailand, our Values let our people know what kind of business they are working for and let our customers know what they can expect from us.
Tesco is an environment based on trust and respect. We have learnt over the years that if customers like what we offer, they are more likely to come back and shop with us again. If the Tesco team find what we do rewarding, they are more likely to go that extra mile to help our customers.
By living the values we create a good place to work and one where great service is delivered.