Tesco 2014: The year to regret – Tesco 2015: The Birth of a New Tesco

January 7, 2015

Antony Welfare - Tesco

This morning I discussed Tescos’ disastrous 2014, the Christmas trading results and the future for Tesco on Sky News.

Tesco has had an extremely difficult 2014 with many issues, which led to a significant fall in sales, profits and the share value:

· Tesco sales and profits have fallen significantly
· Tesco share value was down nearly 50% in the year and well below the companies peak value
· Large retail space is no longer as valuable and Tesco has the most large UK retail space
· The has been a significant rise of the Discounters – Adli and Lidl have taken the market by storm in the food world, and the likes of 99p store and Poundland has taken the non-food trading
· Higher end retailing has grown – Waitrose have taken significant food market share with new stores, better prices and online
· Board room issues and senior management changes have destabilised the business
· The accounting scandal has lost customer confidence, a significant number of senior executives have left and the board have taken their eye off trading (I also covered this on Sky News)

Tesco has had a few highlights in 2014:

· Further growth in Online trading both Ecommerce and Mobile Commerce
· Better customer service and ranges in the convenience sector – the growth market for them
· They have gathered more customer data – see below why this is important!

What is next for Tesco?

As we have heard today, the business has a lot to do, but they are making the right decisions and, more importantly, TAKING ACTION.

In my view, these are the areas Tesco should address:

· Further growth online/Mobile – they have a big market share online and can continue to add new products and other retailers offers
· Sale of non-core assets (Dunhumby, The Bank, Thailand and South Korea)
· Staff reductions at their Head office (There are over 4,000 people in the offices)
· Re-use of the stores (i.e use the space creatively)
· Improve service and product offer in the convenience market (the big growth area)

Tesco is by no means a lost case, they have a significant share of the market and they are one of the biggest retailers in the world.

Like all large retailers, there is a time when they fall, and due to their size, they fall fast and deep. I look at Marks & Spencer, Sainsburys and Dixons to name three household names who have had serious issues over the last 10 years.

Ecommerce, Mcommerce and Social Commerce (buying products via Social Media) will all continue to effect the physical side of Retail, but Tesco is big in this area and has the “ace up its sleeve” of the Clubcard. Customer data and personalised customer marketing is more important than ever. Tesco has this customer data and knows how to use it. Used correctly, Tesco can use this “ace” to regain lost market share and significantly improve the customer experience and in turn, customer loyalty.

I predict that the next 5 years will be led by retailers who understand and embrace:

1. Mobile Commerce – Trading successfully via mobile devices
2. Social Media and Social Commerce – using the power of communities to sell products via Social Media and using Social Media for reviews, recommendations etc
3. Customer Data – One clear view of the customer
4. Customer Convenience – wherever and whenever they shop – In Store, Online, On a Mobile, Click and Collect or Home delivery
5. Innovative use of Stores – Big stores are now “too big”, as we switch to online and convenience – Retailers must use the space innovatively

The customer is now firmly in control, and the retailers who understand this will thrive and those who do not will no longer exist.

2015 will be a big challenge for Tesco, but one where we will see the “New Tesco” appearing – More Customer focussed and more supportive to its suppliers and partners…..oh and more accurate with it’s accounting!!