Why we think Tesco’s positioning can be a strength
Over the last 2 weeks we have been talking about fishing where the fish are. Focusing on the products that shoppers are most likely to buy, in the places in which they are most likely to buy them.
We think there is an interesting link between this and a lot of the discussion about the UK grocery market at the moment. Specifically in relation to the Christmas trading figures and Tesco’s recent strategic announcement. Much of the commentary on the Big 4, and Tesco in particular, has talked about the challenge of being in the middle. Namely that it is a bad place to be, with competitors attacking you on either side.
What used to be held up as Tesco’s biggest strength – that they appealed to the broadest cross section of shoppers – is, ironically, now being identified as their biggest weakness. Well, it is certainly true that they have a mass market positioning. However, we’re not sure that being in the middle is a bad place to be. There are a number of advantages of being there.
For instance, in most markets or categories, there is a simple bell curve distribution of sales by price point. Whether you look at cars, laptops, wine or grocery retailers you will see a similar pattern. If you are in the middle you have more potential customers to go after. It is where most of the fish are.
A company like Tesco already has the advantage of high penetration – more shoppers go there each week than any other retailer. Any changes they make in store are likely to be seen and experienced by a lot of shoppers. It is much easier to better serve your current shoppers than attract a lot of new ones.
It is also harder for competitors at either end to gain a foothold in the middle. The next stage of development for Discounters will be much more challenging as they try to attract a broader shopper base. As you move towards the centre you risk diluting the essence of what made you great in the first place and why your current shoppers visit you.
So, we think the big question for Tesco is not about whether being in the middle is a good or bad place to be, it is about how to play this positioning to their advantage.
As an example, take the Pricing Ladder. This should be an advantage. When you are in the middle you are able to offer products at all the key price points in a category. However, this relies on pricing clarity and consistency. Play around with price, over promote, and you hand the advantage to a competitor with a simpler pricing model.
Stick to simple price (& quality) tiering across categories and you hand power back to the shopper. You are not restricting range and deciding what the shopper can buy. You are allowing the shopper to make the choice. The secret lies in making it as easy as possible for them to do so at shelf. Tesco did this brilliantly in their glory years.
For any retailer or brand, being in the middle can be the worst place to be if your proposition and delivery is weak. But can be the best place to be if it is strong. The middle is where more of the fish are. You just need to fish for them in the right way.
Have a great weekend and speak to you next week.