Editor's Comment: Tesco will look wistfully at Aldi, not Sainsbury's
How irksome it must have been for Tesco CEO Philip Clarke to update the City on its £219m decline in half-year profits - the first in 18 years - on the same day Sainsbury’s interim figures casually revealed a 1.9% increase in like-for-like sales, its 30th consecutive quarter of growth.
The fact that Tesco and Sainsbury’s seem to be going in opposite directions in terms of ranging makes the timing all the more acute: Tesco is reining back its non-food offer, as part of a back-to-basics approach, while Sainsbury’s is pushing on with its non-food expansion.
It’s to Clarke’s credit that he’s very alive to the threat offered by the internet, exploring plans to sublet increasingly obsolete space within Tesco’s out-of-town stores, while opening more dark stores.
“The most poignant comparison of an irksome week for Tesco CEO Philip Clarke is not with Sainsbury’s but with Aldi, which announced a spectacular leap in its 2011 profits”
But for Tesco, the most poignant comparison of the week is not with Sainsbury’s. It’s with Aldi. At the start of this week, the discounter announced a spectacular leap in its 2011 profits, and took the unusual step of giving a select group of journalists access to its senior team - including The Grocer, which enjoyed the longest interview of the lot.
It was in 2007 that the then Tesco CEO Sir Terry Leahy surprised delegates at the World Retail Congress with the revelation that the retailer he most admired was Aldi. And while Tesco’s adoption of tertiary branding was the most obvious homage to the discounter, the increasingly stripped back, no-frills, staff-less feel of its stores - which Philip Clarke is working so hard to reverse - was the more significant. Clarke calls this ‘running too hot’. Another way of putting it is that Tesco’s attempts to ape Aldi were too half-hearted to work.
What all the commentary about Aldi’s astonishing return to form has failed to grasp is that the discounter isn’t really winning new customers. Its growth is coming from persuading existing customers to spend more… despite a near total absence of promotions. That’s a remarkable, and counterintuitive achievement in consumer loyalty, and a real lesson. To Tesco in particular. But in reality, to all retailers.