2013, as fans of the Chinese Zodiac will know, is the year of the snake, and Tesco has gone down a few of those in recent months, as it battles to get its empire back at the top of its game.
Even as CEO Philip Clarke was unveiling more details of its £345m plan to gain a 20% stake in Chinese giant CRE today, the dust was settling on another set of unconvincing domestic results, which saw UK sales fall 0.5% over the first half of the year – despite its £1bn turnaround programme.
Yet if Clarke’s latest roll of the dice works, 2014, according to the man himself, is going to be “the year of the hypermarket”. He told The Grocer this morning that Tesco was planning a major acceleration of its Extra reinvention, from just eight store developments since the turnaround was announced in 2012, up to a massive 75 next year.
At a rate of more than one store a week, it’s a financial commitment that makes the Chinese plan seem like a drop in the ocean – and a sign of how Tesco is being drawn in all sorts of directions.
The results from the first hypermarket relaunches in Watford, Purley and Coventry have seen sales increases of up to 5%, far outstripping its overall sales performance, so it is understandable that Clarke wants to quicken the pace and bring other stores up to speed. If Tesco is to bounce back, it is vital that stores such as Watford become part of the norm for the retailer, rather than rare showpieces.
Yet at the same time, with the vital Christmas period looming, Clarke is fighting a war on a bewildering number of fronts – from convenience and price to cutting-edge digital services.
Take its great rival Sainsbury’s, for example, which presented a far healthier set of results today. With far less of its estate tied up in big hypermarkets, Sainsbury’s sees a bright future in convenience, launching 31 convenience stores in Q2 alone. Tesco can’t afford to lag behind, so its response has been to keep pace: it opened 70 Express stores and One Stops in the first half of the year. (So much for the end of the space race…)
On price, Tesco has neutralised some of its negative perceptions, with Price Promise now six months old. It is tackling its quality issues, both with the store overhaul and the refresh of its own-label lines – the official relaunch of Tesco Finest is set for next week.
And when it comes to digital, Tesco has the potential to dominate the landscape, with its multichannel strategy now much clearer than six months ago. An impressive 35,000 Hudl tablets sold in two days would, for most bosses, have been cause to go home and put your feet up to watch Downton on Blinkbox; for Clarke it was just one small step up another ladder. Life is certainly tough at the top.
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