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Interesting analysis.

After visiting the Tesco “Test” store in Hertford yesterday, I can see much of the new plans are about clean stores, use of fresh food posters, warmer colours and some wood trim – however there’s still a huge emphasis on price – with half price and price drop signage everywhere. Tesco need to understand that it’s not all about the money, money, money for shoppers and it is worrying that they continue to see price as a key issue. They argue that in these tough times their shoppers want low price from them, yet in a market as competitive as the UK grocery sector, price is all too easy a card to play. Any retailer can cut prices, but it is the retailers who differentiate beyond price that really understand today’s savvy shoppers.

Also we all know that Tesco stores need investment – staff, environment, stock levels – that’s the obvious shop-keeping, but they need do more than that – something radical. Our research suggests they don’t deliver the specifics of value to today’s savvy shoppers – value isn’t about lowest or even low price for the majority of shoppers, it is a price/quality balance. Tesco need to look at initiatives that help shoppers make the most of their spending – simply giving products away won’t drive loyalty – they need to review Clubcard and restore that to its former value. Loyalty schemes are an area of growth among shoppers and they need to get back on the front foot with that.

Let’s be honest, Tesco have a great format portfolio, but they aren’t flexing it enough. Our research says around 60% of shoppers using small formats like Express / Metro don’t stock the products they want. Tesco need to tailor their ranges in these formats to suit the local area needs – not roll out standard templates from head office. It’s about understanding their shoppers – not just walking the store – really listening to what shoppers are saying: about them, but also about their changing needs.

Tesco have done well for a long time, and they still make £2.5bn profit. So they aren’t a basket case, but they have serious issues, and serious competition. They need to do something seriously radical – not just clean up stores and stick a few posters up…