Tesco calls in management consultants BCG to oversee drastic range review

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Decisions over the future of thousands of lines at Tesco are being left in the hands of management consultants, suppliers warned this week.

The Grocer can reveal the UK’s biggest retailer has tasked Boston Consulting Group (BCG) to conduct a range review across 40 categories, with a view to reducing its SKU count by up to a third. Tesco is set to make the changes at the end of August. “This is a huge initiative,” said one source. “They are removing as much as 30% of their range and it’s going to have dramatic repercussions. Dave Lewis has had consultants in right from the start and they are the ones who are determining where there will be range cuts.”

Tesco CEO Dave Lewis’ shakeup will see thousands of products removed from the shelves “literally overnight,” with Tesco planning to shift to a simplified pricing structure and focus on better availability of key lines to position itself against the threat of the discounters.

“They’re using Dunnhumby data to conduct a complete review across all 40 categories and outsourcing a lot of this work to BCG because the timeframe they’ve set, the logistics of what they’re doing, would be impossible if the buyers had to complete that many reviews in that little time,” said the MD of one leading branded supplier.

“What Dave Lewis is doing is following up a brutally blunt pricing negotiation process with a massive range cull and he’s right to do it,” added David Sables, CEO at sales negotiation experts Sentinel Management Consultants. “Lewis is short of the correct level of resource to be able to carry out something like this internally so it makes perfect sense that he has turned to consultants. It’s almost certainly an ‘in and out job.’”

“They want to take away selection from buyers,” added one supplier. “They want buyers to focus on price and order levels. They’ve found the basis of their trade has become only about overriders. It’s warped the listings, warped the customer experience, and warped pricing. That’s the rationale.”

“We have been working with BCG for some time on a number of things and we are looking at a review of ranges,” said a Tesco spokesman. “The review is ongoing and no changes have yet been set. There is no specific change to the roles of our buyers but we have been saying we want to use front margin rather than back margin as the basis of our trading.”

Lewis’ move to work with consultants on the strategy also appears to have big implications for Tesco’s commercial team, as the Serious Fraud Office (SFO) investigation its the £263m black hole in its accounts rumbles on.

Another source added: “The strategy certainly has risks, not least of which is the impact on staff. What will buyers make of a big part of their function being outsourced. It’s hardly a vote of confidence.”

“The other question is: what will happen to all the product that’s coming out of the stores? How can it suddenly come out overnight?” added a source.

However, suppliers said the changes did not stop at range rationalisation, with Tesco also set to revolutionise the positioning of different categories to make a more orderly shopping experience.

“Everyone has their fixtures and flows in exactly the same way – this really is a radically different, new vision for the future,” said one.

“If done correctly, it could be very, very positive for suppliers. They are looking at the whole grocery space and changing some of the adjacencies. I think what they’ve started to realise is that grocery essentially looks the same as it did 30 years ago, but consumers have changed. Their research is telling them that a lot of shoppers are frustrated with how grocery is laid out – a lot of shopper missions are being frustrated.

“We’ll have to see what they will be asking of suppliers as part of this, but my impression is this is not an exercise in squeezing suppliers for money; I think they are genuinely interested in making shopping missions easier. There is a culture change happening.

“Buyers are going to participate much more in the build process, and actually fill shelves and experience what different products look and feel like in the fixture, what it feels like to take them off the shelf etc. It’ll be buyers doing this much more rather than just leaving it to the merchandising team. There’ll be much more engagement with the products from buyers. There’s already a huge push on availability happening and you are seeing much more staff in the aisles – not just shelf fillers but management rolling up their sleeves and getting involved in filling the shelves.”