From hero to zero for Tesco as Morrisons wins Grocer 33 service prize

This is a tale of two retailers. For Morrisons and Tesco it was the best of times, it was the worst of times - no prizes for guessing which fate befell which retailer.

Morrisons, a regular winner of this award along with Asda, has snatched back the G33 crown for service from Tesco, which has gone into a tailspin since winning in 2011 - this year finishing last with just five wins for service versus Morrisons’ 15.

Mystery shoppers regularly lambasted Tesco’s stores for looking tired and shabby and criticised staff for being unhelpful and uncommunicative. So it was no surprise when CEO Philip Clarke publicly admitted customer service was not good enough. But how did things fall apart in just 12 months?

The short answer is that while Morrisons raised its game, posting more than double the seven wins it achieved last year, Tesco took its eye off the ball.

“Tesco milked the UK business in every way it could,” says Investec Securities analyst David McCarthy. “The three traditional ways you do that are to put prices up, take quality out of the product and take service out of stores. Tesco has clearly done that and admitted as much, with Clarke saying its stores have been ‘running on hot’.

“You can get away with one of those three things in the short term, but if you do all three long term it catches up with you.”

Morrisons put customer service to the fore with its new initiative HOT - which stands for Hello, Offer, Thank.

Every winning Morrisons manager The Grocer spoke to cited HOT as one of the key reasons for the win. It inspired staff to be friendly in an entirely natural way, they said. Staff weren’t being ordered to wander the aisles with Stepford-style smiles plastered onto their faces. Instead they were simply encouraged to be themselves.

“We want our colleagues to enjoy their work,” says Morrisons group retail director Mark Harrison. “Sometimes working in a supermarket can all be task driven, but we wanted everyone to task and talk. And we wanted staff to interact with customers naturally. After we launched HOT, it became evident that you can’t structure a conversation with a customer. It just doesn’t sound right. So we said be natural and enjoy what you are doing. And this is the result.”

Each employee received one-to-one training from a manager to ensure the rollout was a success - a lengthy process, but a worthwhile one judging by the results. Harrison also attests to a new “buzz” on the shop floor in the wake of other changes introduced by Dalton Philips, such as the overhaul of its own-label range and introduction of its new stores of the future. “There’s a real team spirit. Everyone wants to help each other. It’s a great place to be.”

The contrast with Tesco couldn’t be sharper. But Shore Capital’s Clive Black says Tesco is determined to improve. “Tesco has a 5.2% operating margin. It expects that to stay where it is, which means it will be generating resource to invest in price, service and stores,” he says. “We expect Tesco to be showing steady but real improvement over the next two to three years.”

McCarthy agrees that the situation can be turned around, but will take time. “Tesco is now trying to reverse the decline, but it will take longer to reverse than it realises,” he says.

“You can put staff back in quickly but the current negative image of Tesco among shoppers will lag for a while.”