Never miss a blog....get your retailiation first

Showing posts with label Waitrose. Show all posts
Showing posts with label Waitrose. Show all posts

Wednesday, 9 April 2014

Tesco: Time to reset the clock

Yesterday's latest Kantar Worldpanel data brought little comfort for any of the UKs Big four retailers. The 0.4% drop in Sainsburys' share versus last quarter highlights Justin King's personal astuteness in calling time on his own leadership at just the right moment. His touch is almost as measured as was Sir Terry Leahy's departure from Tesco.

But spare a thought for everyone still at Tesco. Retail is tough when your weekly numbers are perpetually red. Missed targets drive stress and undermine confidence in equal measure. This is especially hard when you are still market leaders. You should be winning, you should feel like winners. You don't and everyone senses your pain. It is suffocating.
So what can they do? Tesco need a radical response and reset the clock on everyone's expectations. 

First, Tesco should explain to the markets what a great job they did historically in driving national UK coverage. Noting Asda's announcement this week of their intensifying moves South; Tesco can proudly note they are the only one of the top four UK retailers with a truly national footprint. They got there first, it has provided a competitive advantage for a period of time, but not forever.

Second, it follows Tesco should reset long-term expectations of their natural market share being somewhere between 20%-25% of the UK market. This will cause pain to the share price in the short to medium term - but it is a statement of inevitability. Tesco cannot open new physical stores as fast as others because they already have their footprint. And they can't acquire anything meaningful given their market share position. Furthermore, for all the success of on-line, the evidence so far is that it’s only a mechanism to slow Tesco's rate of share loss.

It is worth recognising for every new store opened by a competitor, as a rule of thumb, 30 pence of every pound through their tills comes directly from Tesco. So with Aldi, Lidl, Asda and Waitrose still expanding; who knows what course Mike Coupe will set for Sainsbury; and Amazon / Ocado expanding their remits: holding as much ground for as long as possible is Tesco's challenge.

Third, Clubcard needs a structural rethink.  Critics note it has evolved from being a strategic builder of store loyalty into a driver of supplier promotional investment. If the phoney price war ever starts, suppliers will be caught between the investing directly in price or through Clubcard mechanics: both may not be affordable. 

A simple switch in emphasis could prove powerful. Instead of offering schemes to let you redeem Clubcard vouchers outside of Tesco, they should work with third parties to give Clubcard vouchers to reward non-Tesco purchasing. Eat in Cafe Rouge - earn extra Clubcard points and bring the spend back in store. Likewise with Petrol: Tesco’s pump prices are already competitive- stop giving money off fuel in-store, give store vouchers on petrol sales instead.

These points are not panaceas. They bring pain.  Yet they will allow Tesco to celebrate "still above 25%" on each set of results, enable them to approach right-sizing based on a reframed future and refocus Clubcard on driving traffic in-store. Most importantly, they reset the clock on market expectations and buy Tesco some much needed breathing space. 

Thursday, 3 April 2014

Aldi: The Tinned Tomato Test

Want to know how Aldi deliver outstanding product quality and unbelievably low prices?  Simple really. Take the tinned tomato test. 

 How many SKUs of tinned tomatoes do you need in a retail portfolio? (I am not discussing Passatas, Purees or any other variation on a theme, just tinned tomatoes..I mean, how complicated can that be?). 

How complicated? Aldi have 3, Tesco have 36, half of them Tesco own brands. 

Everyone understands simplicity beats complexity in the battle for cost leadership; but quality leadership too?

Ever since Aldi and Lidl first dropped anchor, the major retailers took the view if you could match the discounters price with your cheapest on display offer, you were doing enough to hold your own. Price was the variable to match; quality was located higher up the ladder.

Hmmmm....really?  Aldi's UK website features 22 separate quality awards over the last 2 years: Cheese, Wine, Baby, Frozen - demonstrating outstanding quality can go hand in hand with portfolio simplicity and low prices. 

Category for category, the major retailers can match Aldi's quality and prices; they just struggle to do both jobs in a single product.

When Aldi's Mince Pies beat Fortnum & Mason - all historic assumptions of price / value equations go out the window: Waitrose quality at Asda Smartprice prices. WOW.

If you can't beat them, join them. Fewer products of outstanding quality will drive higher velocities, lower costs and lower prices. It will also mean fewer suppliers. And branded manufacturers better get with the programme because defending inflated brand to own label price premiums will be squeezed like never before.

Aldi - like brands, just simpler. And that's how they do it. Simple really.

PS...It's not all about Aldi....The International Wine & Spirits Competition (IWSC) 2013 awarded Lidl UKs Western Gold Bourbon a Gold Outstanding Award and and ranked it 7th in the top 13 Bourbon's in the world. 

Lidl UK Western Gold Bourbon Whiskey 6 YO
Comment: "Concentrated citrus and rich honey on the nose with lovely, light bourbon backing. Slow entry onto the palate with easy flow and deep rich fullness without being heavy. In fact moves lightly and with elegance. Lovely mature flavors with caramel, malt, corn and a hint of smoke. Hints of banana and more honey lead into fine finish."
Award: Gold Outstanding
Read more: