Tesco’s current strategy worries me enormously, especially off the back of a six per cent fall in profits. Chief executive Philip Clarke has confidently explained, “Tesco will be firmly established as a middle-market retailer, which offers low prices and good quality – all under one roof”. My translation of this is essentially, “we’re going to be everything to everyone, somewhere around the middle of the road, all in one place”.
Being a broad provider can potentially lead to great success. However, the middle of the market is often the most difficult to navigate. Why are you there? Lidl and Aldi are doing an amazing job of bringing some superb artisanal or small family manufacturers to shoppers at a discount rate.
They have the bottom of the market very nicely sewn up and a 30 per cent year-on-year increase in profits to boot. At the other end we have Waitrose, also enjoying year-on-year growth, offering a sublime experience of on-hand experts and the choicest selection of food one could wish for, for those that can afford it.
Of course, not everyone wants to wander a utilitarian warehouse in search of budget bargains and equally not everyone is excited by triple-stuffed game birds with apricot jus. There is without a doubt a place for a nice environment, helpful staff, experts on hand, value-for-money food and the odd inspiring treat. Tesco delivers this with efficiency and bright lights. So why the decline?
Tesco has gone off the rails in two places. Firstly, what does it stand for? “Every little helps”, is, in essence, only a price promise. In any business, if price is your sole differentiator (unless you’re Poundland) then you’re destined to live a life of discounting and promotion, constantly challenged by the competition. There has to be another point of difference, an added value brought by the brand – especially in the middle of the market. John Lewis manages to provide a wide range of products all under one roof, but promises to be “never knowingly undersold”, which refers not merely to price, but to quality and service also.
You know that if you go to John Lewis to buy a telly you might pay a little more, but you’ll walk away with the best product for your needs with a bulletproof guarantee and great after-sales service. I’m not sure what Tesco provides me with beyond “all sorts of stuff at pretty cheap prices”.
Which brings up the second issue for the supermarket: its relentless brand expansion. What can’t you buy at Tesco? It is a supermarket, bank, film-streaming service, clothes store, electricals retailer and so on and so on. Such proliferation has to have a purpose. We consumers need to know why.
Virgin is a fine example of a brand which proliferates. How can we trust a record store to safely fly us to America, look after our cash and connect our mobiles to our loved ones? The reason we trust Virgin is because it stands for service, for beating the establishment, shaking up the system to make things simpler and better, and doing it with a sexy little wiggle along the way. Knowing what Virgin stands for, we applaud its stretch into new areas of our lives.
Tesco needs to take a long, hard look at its reason for being. Why is Tesco in business? What is the unique brand package it offers customers? Once it knows, Tesco needs to tell us, then it needs to start delivering it with every fibre of its being. It needs to be more than just “Every little helps”. Once it gets this straight, I’m pretty sure we’ll all fall back in love with Tesco.
Simon Massey is global chief executive of strategic branding consultancy The Gild, www.the-gild.com