Tesco is talking with increasing confidence about its business performance and plans, most recently at its Q3 and Christmas trading update. Kantar data is positive, showing Tesco market share at its highest level for some years and better growth in December than most other grocers. So what is happening at the market leader, and what can we learn? I see two lessons.
First, responding to industry disruption. Grocery retailing is constantly changing and if anything the change is accelerating. At the moment, the big talking points are the rapid growth of meal kit companies (Gousto and the like) and the huge investment in quick commerce (such as Getir and Gorillas).
Tesco’s response to kits includes its ’dinner sorted’ activity, embodied in its Jamie Oliver-endorsed tray bake range. It’s hard to imitate everything the meal kit companies offer, but this meets some of the same consumer needs, and at a much lower price (£8 for four people). Shoppers looking for something easy, wholesome and a bit more interesting for a weeknight meal may find this range ticks the box.
For quick commerce, Tesco first trialled its Whoosh service in one store last May and now says it will be in 600 stores by December. The delivery costs £5 and is guaranteed within an hour of the order, but Tesco says it hits 30 minutes more than half the time. Elsewhere, it’s trialling a partnership with Gorillas. By the end of the year, Tesco should have a pretty good understanding of this emerging sector.
Second, doing the basics brilliantly. The great majority of sales in Tesco and the wider industry will continue to come from large stores and large baskets online. With consumers experiencing the highest levels of inflation in 30 years (5.4% in December), and considerable noise around food prices as well as fuel, value is more than ever the epicentre of consumer need.
Tesco is responding to this with Clubcard Prices, Aldi Price Match and EDLP. If you have any doubt, just walk around its produce departments. Fruit and veg has always been key in setting the tone for the whole store, and in Tesco you’ll typically find decent product, good availability and very prominent value messaging. Lots of Aldi price matches, a cheeky Aldi echo with the Fresh 5 promotion, and Clubcard Price tickets wherever you look.
Tesco’s corporate communication talks about its “unwavering commitment to value”, and to be fair, that’s the impression the shopper will likely get.
So what to learn from Tesco? Success in our industry is about responding to disruption but also about keeping an eye on the main prize by doing the basics brilliantly. I’m afraid it’s not one or the other – it’s both.
No comments yet