Knocking Tesco can seem like a national sport but it remains top of shoppers’ lists. Charlotte Hardie considers why the UK’s biggest grocer continues to be Britain’s favourite retail brand
If the headlines were anything to go by, you might assume that Tesco has had a hideous year. Critics of the grocery giant have dined out on the former leader of the big four slipping to the back of the pack when it comes to like-for-like sales growth.
But, of course, what these critics like to ignore is that Tesco still has 30 per cent market share, its sales are still growing and it is still making a phenomenal profit – it should break the £3bn barrier this year.
Its success is reflected in the fact that for the third year running it won the TNS Consumers’ Favourite Retailer category at the Oracle Retail Week Awards last month. Tesco may have its critics, but the views of the 15,000 shoppers polled cannot be ignored.
As Tesco executive director of corporate and legal affairs Lucy Neville-Rolfe says: “Being voted for by our customers is always fantastic. At the core of our strategy is listening to, responding to and earning the loyalty of our customers. This year has been difficult because consumer confidence has been declining, but we’ve earned their trust.”
While slightly fewer people who took part in the survey voted for Tesco than last year, it still amassed 13.9 per cent of the votes. TNS Worldpanel research manager Elaine Giles says: “We have seen a slight drop in the number of people that voted for Tesco – about 1 per cent – so they haven’t increased their popularity, it’s been more a case of maintaining it.”
So just what has Britain’s biggest retailer done over the past 12 months that has helped secure the top spot once again? Search for the word “Tesco” in the Retail Week news archive and there is immediate evidence of what a busy year the grocer has had. There are pages and pages of news stories devoted to the countless product launches and store developments that have taken place.
Among the most notable has been the launch of its Discounter range last September. Tesco research of 20,000 of its customers revealed that price has never been higher on people’s list of concerns since the 1980s. And so followed a £100m investment into a low-cost range spanning 10 categories including meat, dairy, bakery, household goods and health and beauty. The products range from its 67p Daisy washing-up liquid to its £1.59 Discounter bacon.
It worked. To use just one category as an example of its popularity, in November Retail Week revealed that in the first six weeks since its launch, sales of Tesco’s Fresh n Lo semi-skimmed milk product totalled 7 million litres – equating to £3.7m. In the same time frame it also sold 2.4 million rolls of Spring Force toilet tissue, 178,637 litres of Daisy washing-up liquid and 427,000 boxes of half a dozen Farm Pride free-range eggs.
Neville-Rolfe says 25 per cent of customers have purchased at least one Discounter product. “The Discounter range has been a key part of our strategy this year. People are shopping differently and want help making their wages go further. We’ve had a lot of cut-through,” she says.
And because price is so high on shoppers’ list of priorities, Tesco has also invested heavily in running promotions this year. In January, for instance, it hit back at rival Asda’s price cuts with an investment of another £100m on a combination of permanent price cuts and promotions on more than 3,000 products.
Join the club
Interestingly, Neville-Rolfe says that the number of its shoppers signing up to its Clubcard over the year increased by 1.5 million – more than the annual average, although Tesco won’t specify what this average is – taking the total membership number to 14 million.
The retailer believes savings that Clubcard holders can make through vouchers and redeeming points has a lot to do with the increased uptake.
Loyalty cards have always been an invaluable way of collating information about shopper behaviour and so this increased membership has further helped Tesco meet more shoppers’ needs. “The brilliant thing about the Clubcard data is it enables us to do a lot of polling, focus groups and research on what people think and say. You can change ranges and vouchers and so on accordingly,” Neville-Rolfe explains.
Another major development has been the increase in Tesco’s share of the financial services market. In July last year the grocer took full ownership of Tesco Personal Finance after acquiring the Royal Bank of Scotland’s 50 per cent shareholding in the business for £950m. At the time Tesco said it wanted the move to bring about £1bn in profits a year – more than double the previous year’s £400m.
Neville-Rolfe says the acquisition has proved popular with its customer base and the grocer has been particularly pleased with the uptake of its savings products. By the end of this year, Tesco will have 30 in-store finance centres. “As people’s trust in banks falls, people are investing in Tesco because of the very characteristics of the Tesco brand,” she says. “We’re open and transparent. That’s what people don’t feel they have in banks.”
Things can only get better
But perfection would be boring and there is always scope for improvement. Giles points to one aspect of the poll results that is less positive. Last year Tesco slipped one place to ninth in the clothing category. This year it dropped out of the top 10 altogether.
Neville-Rolfe is not altogether concerned. “Clothing is one of the most difficult markets at the moment, but this isn’t something we would recognise and it doesn’t match our customer research,” she says, adding: “Our Christmas clothing sales were up 5 per cent year on year.”
That said, she is anything but complacent. “We’re only as good as last week’s trading. If we listen and do the right thing we can continue to win the trust of customers,” she says.
Importantly, Tesco is also looking ahead to when the recession starts to lift. Neville-Rolfe says: “Absolutely key is to keep going with innovation and keep customers on your side.” She adds that the grocer is already thinking beyond the recession and points to the example of its health and beauty categories. “Those will be important for the future. When things improve people will feel better and they will want to pamper themselves more. This is another area of opportunity.”
The grocer is also very aware of the important role it plays in local communities. Like many of its rivals, Tesco knows it needs to be more than just a store and this is bound to have an effect on its popularity. As Neville-Rolfe says: “We’re different in that we get involved in people’s lives where we can.”
The grocer has, for instance, store colleagues across the country who act as dedicated community champions to look at ways their store can get involved with local projects. It also has a dedicated charity of the year – last year this was Marie Curie Cancer Care; this year it is the Muscular Dystrophy Campaign. It also works with schools and runs numerous initiatives such as the FA Tesco Skills Programme, which visits schools, clubs and holiday skills centres to help children get fit through football.
Many might argue that the outcome of this poll is nothing more than a reflection of Tesco’s enormous market share. They might say that the very fact most of the 60 million people living in the UK can access one of its stores is bound to mean that more people will, by default, vote for it. But Neville-Rolfe dismisses this argument. “It’s just not the case. People vote with their feet in retailing. If they liked another retailer better they would vote for them.”
Of course, this retailing giant has an advantage over many of its retail counterparts in that it is a household name, has economies of scale and an international presence that enhances its reputation. What’s more, it has hundreds of millions of pounds at its disposal to invest in improving its service and meeting its shoppers’ needs. But it hasn’t got to this fortunate situation by luck.
As Giles says: “People’s loyalty towards a brand builds up over time. It takes a long time to lose that loyalty and love that people have for a brand.” People don’t vote for Tesco as their favourite retailer merely because they happen to shop there. A retailer has to work harder than that. Like it or not, all retailers should look and learn.
Tesco over the past year investments and launches
April 2008: Tesco launches a carbon footprint label on 20 of its own-brand products to show consumers how many grams of CO2 have been created in the production, packaging, distribution and disposal of the products.
July 2008: the grocer buys the Royal Bank of Scotland’s 50 per cent stake in Tesco Personal Finance for £950m and embarks on a roll-out of personal finance desks in its Extra superstores.
It takes on Argos with its first catalogue shop launch at its Homeplus store in Bristol. It was Tesco’s first in-store order and collect service.
September 2008: the low-cost Discounter range is launched in response to the growing popularity of discounters Aldi and Lidl.
October 2008: it trials a customer feedback service called Every Comment Helps in about 100 stores, allowing shoppers to give their thoughts on their shopping experience.
December 2008: Tesco begins testing its non-food Direct offer in small- format Tesco Metro stores.
January 2009: an ad campaign is launched, claiming Tesco is Britain’s cheapest supermarket. The online and in-store campaign compares the cost of typical shopping baskets at Tesco with the same from its rivals.
February 2009: Tesco Direct signs a deal with customer review specialist Reevoo enabling shoppers to review its products online.
A new store fascia – Superstore – is unveiled in the centre of Liverpool, which houses a wider product range including clothing, electricals and homewares, as well as a full range of food.