Original post : 16 Mar 2012

When you're on top there's only one way to go........

ValueIt was announced this week that Richard Brasher, Tesco's head of UK Business, is to step down. He will be replaced by the big cheese (don't worry this blog will not be littered with grocery references) Phillip Clarke. The news follows the revelation that Tesco was the Christmas turkey (sorry!)  of the supermarkets, posting its worst festive season performance for 20 years and a shock profit warning.

There is, to some extent, an inevitability about the drop in Tesco's performance - you can't be at the top of the pile for ever. In the highly competitive food retail business every player is constantly struggling for an edge. It's possible that Tesco will get their mojo back and resume their place as market leader for growth.

The blame for the poor performance was laid at the door of the economy. Shoppers were moving to economy brands and cutting back on luxuries. It sounds plausible at first but why weren't Sainsbury affected in the same way? Why was Waitrose pulling in the punters hand over fist?

There are lots of opinions flying around about why Tesco has suffered and the reality is there are probably lots of reasons, but I think there are a couple of things that even small businesses can learn a lesson from:

1/ Value does not mean cheap 

In autumn Tesco launched their "Big Price Drop" promotion which was supposed to reduce prices by about £500M. They cancelled double Clubcard points to pay for it. The promotion is widely regarded as a flop. The promotion coincided with general rises in food prices which meant that customers often saw no benefit in their total bill. There were suggestions that quality and customer service levels were not being maintained (according to Kantor retail analysts). So the customers were expecting value but were perceiving similar bills for a worse service.

Value doesn't mean cheap - it means the customer is happy that he gets a good return for his spend. In this respect it seems that Tesco's customers didn't feel that they were.

2/ You can't tell customers one thing and deliver another

Added to the Big Price Drop (or Big Price flop) promotion failure it was reported in the press that Tesco reduced the price of their frozen turkeys by 50% in the run up to Christmas. Sounds great but it was discovered that competitors were selling them for the same price without a big reduction. Again customers were lead to expect one thing but were presented with something very different.

You have to live up to your customer promises. If they don't trust you you'll lose them.

Now pretty much all this article was written based on what I've read in the press - I don't shop at Tesco very often at all. In fact I am a supermarket tart (oops!). I'll triffle (yeeks) with all of them and I don't  give a fig (yikes).

With that in mind let me know what you think. Where has Tesco gone wrong and, more importantly, what do you think we as small businesses learn from it?


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