CEO Philip Clarke this week put a seismic shift to digital at the heart of Tesco’s future strategy.
As attention focused on Clarke’s efforts to address UK store underperformance, with a £1bn turnaround plan, a new online war footing signalled Tesco’s future intent, industry insiders said.
Clarke confirmed plans to slow down out-of-town supermarket expansion in favour of a focus on c-stores, online shopping, and click-and-collect. But Clubcard emerged as perhaps the key weapon, with data powerhouse Dunnhumby drawing up plans to transform promotional loyalty offers.
The retailer says it’s planning a new era of personalised shopping, calling time on the likes of broad brush £5-off vouchers for every £40 spent, to be replaced by individual customers targeted with specific promotions online or via mobile phones.
In the week that Tesco.com relaunched, with its new Marketplace, in direct competition with Amazon and other retailers - the number of products will increase to 200,000 by Christmas. It will be accompanied by a major shift in Tesco’s marketing spend from traditional media such as TV and press towards online and social networks.
How the £1bn will be spent
Revamped stores - £200m: In the next year, 430 stores will receive around £500k each to “improve the shopping trip”. Rest of the 2,800 stores to follow in next two years.
Service - £200m: 8,000 more staff in counters, produce and alcohol , plus extra training and new uniforms. Trials in 200 stores boosted like-for-likes by 1.1%
Quality and price - £450m: Tesco Finest and standard range to follow Value relaunch later this year. New marketing blitz likely following review of £110m advertising account.
Internet - £150m: Two more dark stores planned for London and a further rollout for Oxfordshire and the West Midlands plus 700 new click and collect pick-up points.
After presiding over Tesco’s first drop in UK profits for 20 years, Clarke said Tesco would emerge as a dominant force in a new age of personalised shopping.
“We’ll put Dunnhumby back at the heart of the business,” he said “We’re making fundamental changes to our space plans as customers go more to c-stores and online. We’re going to use Clubcard more to personalise the experience. That’s really where this business is headed.”
Sources close to Clarke say he has become frustrated that Tesco has not made enough of the dominance of its Clubcard scheme, which has an estimated 17 million members. One former senior Tesco executive now working in online said: “The thing I could never understand is why Tesco didn’t put Dunnhumby at the centre of its dotcom operation before now. It has never really leveraged Clubcard as it should because it has data that is far richer than the likes of Amazon.
“This is the area in which Tesco can go on the offensive and it’s a very significant threat to rival businesses that don’t have a differentiation in-store.”
In response to Amazon’s burgeoning sales, Tesco’s new Marketplace this week began selling goods from electrical retailer Maplin, jeweller Goldsmiths, baby brand Mamas & Papas, gift website Purely Gadgets, and garden specialists Crocus and Thompson & Morgan.