CHESHUNT, ENGLAND - ResearchFarm has published a report seeking to answer the question: what should a Tesco turnaround look like? According to the firm, a proper turnaround plan would include three essential elements:
- A modern refresh of its loyalty program.
- Responding to the challenges of discount competitors.
- A renewed focus on its non-food business as well as Tesco's online marketplace.
A New Loyalty Program
At one point in time, Tesco's loyalty program “gave the company a clear competitive advantage,” according to ResearchFarm. Similar offerings from Sainsbury's, Asda, and soon Morrison, along with the growth of Amazon in the British retail community has weakened this advantage, however.
“Tesco needs to do three things [to change this trend], make clubcard relevant for the mobile age...widen the scheme to become all encompassing and integrating it with the other business units...and then perhaps an opening up of its profiles and customer data to other businesses,” the report explained.
Discounter Competition
ResearchFarm then turns towards the challenge Tesco has faced in maintaining its market share in the face of fierce competition from hard discount retailers.
In order to respond to this growing competition, ResearchFarm recommends that Tesco strive to choose the best possible store sites while entrenching itself in the local communities in addition to working on reducing operating margins. Solely engaging in a price war would not be the right course of action, it argues.
“As discussed above a price war won’t work. This means that Tesco needs to do its utmost to stop the discounters from expanding – in other words Tesco has to invest in land-banking the best convenience store sites,” the report explains. “We believe that Tesco’s best bet is the focus on convenience especially in high footfall locations and to make its multichannel capabilities count.”
Non Food Issues
Arguing that £0.5 billion in non-food online sales in 2013 through 2014 is not large enough given Tesco's market share and size, ReserachFarm strongly recommends the retailer re-evaluate the way it conducts its non-food related business operations.
“...we believe that in future many non food categories will increasingly move online, so Tesco would be best advised to follow the shopper and build out is online non food proposition.”
Would these measures be sufficient to turn Tesco's fortunes around? It is hard to say for sure, but whatever actions the retailer does choose to take, you can count on ANUK to bring you the latest.
