What we can learn from Tesco's success.
Tesco are talking with increasing confidence about their business performance and plans, most recently at their Q3 and Christmas Trading update. Kantar data is positive, with recent Tesco market shares at the highest level for some years, and better growth in December than most other grocers. So what is happening at the market leader, and what can we learn? I see two lessons.
First, respond to industry disruption. Grocery retailing is constantly changing and if anything the change is accelerating. At the moment, the big talking points are the rapid growth of Meal Kit companies (Gousto etc) and the huge investment in Quick Commerce (Getir, Gorillas).
Tesco’s response to Kits includes their Dinner Sorted activity, embodied in their Jamie Oliver endorsed Tray Bake range. It is hard to imitate everything that Kit companies offer, but this meets some of the same consumer needs, and at a much lower price (£8 for four people). Shoppers looking for something easy, wholesome and a bit more interesting for a weeknight meal, may find that this range ticks the box.
For Quick Commerce, Tesco first trialled their Whoosh service in one store last May and now say it will be in six hundred by December. The delivery costs £5 and is guaranteed within an hour of the order but Tesco say they hit thirty minutes more than half the time. Elsewhere, they are trialling a partnership with Gorillas. By the end of the year, Tesco should have a pretty good understanding of this emerging sector.
Second, do the basics brilliantly. The great majority of sales in Tesco and the wider industry, will continue to come from large stores and large baskets online. With consumers experiencing inflation higher than for thirty years (5.4% in December), and considerable noise around food prices as well as fuel, value is more than ever the epicentre of consumer need. Tesco are responding to this with Clubcard Prices, with Aldi Price match and with Low Everyday Prices. If you have any doubt, just walk around their Produce department. Fruit and Veg has always been key in setting the tone for the whole store and in Tesco, you’ll typically find decent product, good availability and very prominent value messaging. Lots of Aldi Price Matches, a cheeky Aldi echo with the Fresh 5, and Clubcard Price tickets wherever you look. Tesco’s corporate communication talks about their “unwavering commitment to value” and to be fair, that’s the impression the shopper will likely get.
So what to learn from Tesco? Success in our industry is about responding to disruption but also about keeping an eye on the main prize by doing the basics brilliantly. I’m afraid it’s not one or the other – it’s both.
Jeremy Garlick is a Partner of Insight Traction, consulting with FMCG and Retail companies. He was formerly Head of Insight at Sainsbury’s, Waitrose and Premier Foods.