You would be hard pressed to think of a retailer that had focused on cost as much as market leader Tesco, says Steve Dresser.
Expenditure became a near obsession and stores frequently ran out of carrier bags due to cost control.
Another area where cost was tightly controlled was store hours.
Colleagues left and weren’t replaced, overtime was cancelled and things were simply run too tightly.
In retail, it doesn’t take long for the perfect storm to gather, particularly when there aren’t enough people around, queues mount and more checkouts are opened, taking people from their tasks on the shop floor.
Queues are dispersed but customers are unhappy at waiting, customer service wanes, availability suffers, waste rises and sales fall.
While former Tesco chief executive Philip Clarke did accept the need to put hours back into stores, it was done in a drawn out process and didn’t cover the entire store - only selected departments.
When sales didn’t return (retail is about consistency) the hours were reduced once again and Tesco went back to saving, rather than serving. Losing its way for customers but keeping the profits in line.
When Dave Lewis was parachuted into the business he made his email address public and requested contact from colleagues. More than 1,000 emails were read as he gauged the mood on the ground (he even got a note from me).
There were numerous issues that came to the fore. Hours were undoubtedly a crucial one: stores simply didn’t have the tools (or carrier bags) do to the job.
Dave Lewis reversed that and invested in the stores. Hours were available and people were abundant this Christmas at Tesco.
Completing a shop and seeing checkouts open is a great way to ensure customer sentiment is positive.
Whilst a ‘simple’ thing to resolve, investing hours is expensive and formed part of the fourth profit warning in 2014.
Also part of that profit warning was the move to become ‘competitive’ at Christmas. The ‘festive five’ - five produce lines at 49p - was an example of promotions that Tesco needs to do in order to be competitive versus their mainstream rivals, let alone the discounters.
Sharper pricing and promotions form part of the plan under Dave Lewis, specific buying terms aside – Asda has moved its offer closer to discounters, which by definition has left Tesco too far adrift on price.
There is a lot of work to be done at Tesco but Dave Lewis will take decisive action.
While Blinkbox won’t raise much capital, shedding such businesses along with other recent purchases such as Giraffe will send out a message that Tesco is getting back to its day job.
Tesco Cars, Tesco Record Label, Tesco Film studio, Tesco Kitchens, Blinkbox and its own smartphone… all examples of a loss of focus.
Dave Lewis needs to get Tesco back to its roots – selling cheap groceries to the general public.
- Steve Dresser is director of Grocery Insight and a grocery retail blogger
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Comment: Dave Lewis will take decisive action at Tesco