Tesco’s Christmas bombshell is over a week old now, but the shock waves are likely to continue for some time, for suppliers, competitors and investors.
I want to focus on the internal ramifications, however. In Tesco’s airless corridors, some will be feeling a sense of relief. The cat is out of the bag, as CEO Philip Clarke finally fessed up to Tesco’s overexpansion in the UK, and its underinvestment in its core UK estate. No one within Tesco had publicly dared to admit to this. When challenged, Sir Terry Leahy was always calm deprecation. But the warning signs were all there.
Last week I received a YouGov press release detecting Tesco’s reputational problems as early as December. Big deal! We’ve been writing about glaring deficiencies within the UK business since 2009! In obsessing with cost, and Aldi’s stripped down business model (and ploughing its profits into expansion at home and abroad), stores have felt soulless and unloved for some time. It lost out to Asda as Britain’s favourite supermarket in The Grocer Golds last June. Store managers were privately underwhelmed by the Big Price Drop. Double the Difference was a PR disaster. How shall I put it? Sherlock Holmes would not have had to look far for clues.
So relief, but also dread. For certain key executives, anyway. Tesco has lost its magic touch. Its mojo. And it’s not easily found in such a fiercely competitive marketplace. What brought this home to me this week was the contrast with Virgin. The pace with which Virgin Bank has acted since its bargain-basement acquisition of Northern Rock in November contrasts strongly with Tesco’s banking arm (bought near the top of the market in 2008), which is stuck in the slow lane.
And talking of speed, did you see Virgin’s brilliant new broadband ad, with Usain Bolt posing as the Bearded One? Can you imagine an ad like that from Tesco? It’s had its brilliant creative moments in the past, like the Spice Girls and the seminal Dudley Moore chicken buyer ad.
The latest hurried Tesco ad this week is offering a £5 voucher with every £40 spent. “It’s just our way of saying ‘Thanks’,” it says in the sign-off. I think they mean ‘Oops’.