It’s too early to call the end of the global recession, but it has stopped getting any worse. That’s the prognosis from Tesco international director Phil Clarke.
Tesco has found itself exposed to some of the toughest markets in world retail, with non-food being especially hard-hit, and the company has needed to work hard to reinforce its value credentials in all its markets.
Clarke says the global contagion hit customers at different times; Central and Eastern Europe and Turkey around last June, with Asia – where he says “consumers went into shock” – following late last year. But Clarke says the hardest conditions have been found closer to home, in Ireland.
Last week the company cut the prices of 12,000 lines in 11 stores by an average of 22 per cent in a mammoth operation soon be extended to all Irish stores.
Clarke believes the response to the difficulties in Ireland reflects Tesco’s philosophy of being local, flexible and adaptable. “Tony Keohane [chief executive of Tesco Ireland] has seen a problem and asked: “What am I going to do about that,” Clarke says. “That’s where the group comes in by backing him to do it.”
Fresh & Easy in the US has also been battered, being located in some of the worst affected parts of the country where household foreclosures have reached 25 to 30 per cent. “All you see is for-sale boards and confidence has been shot in those who have stayed behind,” Clarke says.
This has intensified the need to refine its US format, which he’s now happy with. “We’ve sharpened promotions and worked on the economic model,” he says.
Thinking local isn’t just about individual countries, but the geographies within them, he says, adding that China is a huge opportunity. “The Chinese market is actually nine markets and we’re only in four of them.”
To date Tesco has had to open leasehold stores but now plans to develop shopping centres of its own, totalling 50,000 sq m (53,821 sq ft), a fifth of which will be Tesco hypermarkets. The first is due to open in the autumn and four are planned to launch by the end of the financial year.
Next is India, where Tesco will open its first cash and carry next year having agreed a franchise agreement with Tata, which is deploying Tesco’s operating model in hypermarkets.
China, the US and India have 2.5 billion consumers between them. Developing Tesco’s presence in these countries will take precedence over entering new ones.