Tesco: 'affluence is the new format'
Tesco is set to launch a wave of price promotions and range reviews that target customers based on the a uence of the areas they live in, The Grocer can reveal.
The strategy, initially involving up to 300 stores, is being spearheaded by UK CEO Richard Brasher to try to reverse sliding sales after Tesco’s worst Christmas trading in 20 years.
Tesco has begun talks with suppliers aimed at launching price promotions in less well-off areas where it faces competition from the likes of Aldi and Lidl. Sources at the retailer con rmed up to 100 stores had been earmarked.
They added that up to 200 stores had been identified in affluent post codes where it will concentrate on alternative promotions and ranges aimed at shoppers defecting to Waitrose and Sainsbury’s.
“It has a list of 100 stores where it is going to launch special deals at discount prices,” said one Tesco food supplier involved in the talks.
“We will work with them on it, although we will be very concerned if they try to pass on the cost.”
A leading sales director added: “I think it’s right that they understand the subset of their customers, but I’m worried this could introduce undue complexity when what we need is less.”
The bid to tap in to both austerity and affluence follows widespread criticism of Tesco’s nationwide Big Price Drop campaign.
“It’s a very clever idea and a much more stratgic approach being taken by Tesco, unlike the Big Price Drop which came across as very knee-jerk,” added one senior retail source. “Richard Brasher has been saying affluence is the new format.”
Tesco is con dent any dual pricing strategy will avoid a run in with the competition authorities.
Sources at the Competition Commission told The Grocer the move was “unlikely to sound alarm bells.”
Meanwhile, Tesco sources revealed its new Metro store in London Bridge is one of those being used as a model for the revamp promised by chief executive Philip Clarke. The store has higher sta ng levels and training, more vibrant décor and extra checkouts to cut queues.
…as experts say profit warning means end of space race
Tesco’s first profit warning for 20 years is already having a big impact on the construction industry - and may herald the end of the supermarket space race, analysts have predicted.
As retail construction firm ISG issued a profit warning this week “due to cancellation and deferral of projects by key UK food retail clients,” research carried out by property analysts Glenigan found supermarket investment in new builds in 2011 dropped 15% to £664m.
Spending on refurbishment almost doubled, to £461m. Glenigan analyst James Abraham said with the space race focused on new build, “Tesco’s announcement last week that it will build few Extras and focus on extensions could alter the overall competitive landscape significantly.”