Tesco to invest in ‘better’ marketing to arrest decline
Tesco has pledged to invest millions in making its marketing “better, clearer and more relevant”, one of several initiatives the supermarket has announced to improve the fortunes of its UK business as sales slipped again.
The retailer will invest £1bn in improving stores, customer experience, promotion and pricing strategy and own-label ranges. It has already relaunched its Value range.
A review of Tesco’s brand communications strategy was recently called with an ad agency review announced last week. It has also appointed David Wood as marketing director to lead the UK team after moving former UK marketing director Carolyn Bradley to an international role.
Like-for-like sales, which excludes the impact of stores open for a year or more, fell 0.9% in the 12 months to 25 February. There was a more marked fall in like-for-like sales in the second half of Tesco’s financial year, when sales fell by 1.2%.
The decline in sales led to a 1% fall in UK profit to £2.5bn for the year ending 25 February.
Total UK sales increased 6.2% over the year to £47.3bn.
Philip Clarke, group CEO, highlighted six areas that Tesco would focus on improving including; service and staff; stores and formats; price and value; range and quality; brand and marketing and clicks and bricks.
Clarke, who took control of the UK business from Richard Brasher who stepped down in March, says: “We fully recognise that we need to raise our game in the UK … As we improve the shopping trip for our customers, it will follow that our sales growth and financial performance will improve too.
“These are decisive steps and this cost investment - as we have already announced - will constrain our near-term profitability. … We are adapting our UK capital plans so that we have the right store base for the future, to underpin the returns that create long term value for our shareholders.
“Together these steps are the right things to do both to improve the shopping trip for customers and to secure a return to profitable growth in the UK.”
More staff, ‘warmer’ looking stores and a roll out of click and collect services are also planned.
Expansion plans have been put on hold with the focus switching to the existing portfolio that will see 430 stores refreshed over the next 12 months.
Group sales, which includes Tesco’s international business, increased 7.4% to £72bn Group trading profit increased 1.3% to £3.8bn.
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Readers' comments (4)
This investment is putting right past neglect of investment in its UK stores whilst it concentrated on financed growth in Asia, Eastern Europe and the US.
One highlight is tailoring products to suit what local people want. This is indicative of how Tesco may be starting to put right its underuse of its Clubcard data over the last few years. It's also a recognition of how the supermarket needs to meet the needs of local communities more widely.
Non-food items retail online has huge potential, Tesco has doubled the number of products on Tesco Direct to 75,000 items. This is not just a challenge to Sainsbury’s and Asda, but Amazon as well.
This investment is good news. It is putting right past neglect of investment in its UK stores whilst it concentrated on financed growth in Asia, Eastern Europe and the US.
One highlight is tailoring products to suit what local people want. This is indicative of how Tesco may be starting to put right its underuse of its Clubcard data over the last few years. It's also a recognition of how the supermarket needs to meet the needs of local communities more widely.
Non-food items retail online has huge potential, Tesco has doubled the number of products on Tesco Direct to 75,000 items. This is not just a challenge to Sainsbury’s and Asda, but Amazon as well.
excludes stores open for a year or less surely
Hi Rosie,
Pleased to see strategy changes at Tesco but do they go far enough to get them back on track?
After visiting the Tesco “Test” store in Hertford yesterday, I can see much of the new plans are about clean stores, use of fresh food posters, warmer colours and some wood trim – however there’s still a huge emphasis on price – with half price and price drop signage everywhere. It is worrying that they continue to see price as a key issue. They argue that in these tough times their shoppers want low price from them, yet in a market as competitive as the UK grocery sector, price is all too easy a card to play. Any retailer can cut prices, but it is the retailers who differentiate beyond price that really understand today’s savvy shoppers.
Also we all know that Tesco stores need investment – staff, environment, stock levels – that’s the obvious shop-keeping, but they need do more than that – something radical. Our research suggests they don’t deliver the specifics of value to today’s savvy shoppers – value isn’t about lowest or even low price for the majority of shoppers, it is a price/quality balance. Tesco need to look at initiatives that help shoppers make the most of their spending – simply giving products away won’t drive loyalty – they need to review Clubcard and restore that to its former value. Loyalty schemes are an area of growth among shoppers and they need to get back on the front foot with that.
Tesco have a great format portfolio, but they just aren’t flexing it enough. Our research says around 60% of shoppers using small formats like Express / Metro don’t stock the products they want. Tesco need to tailor their ranges in these formats to suit the local area needs – not roll out standard templates from head office. It’s about understanding their shoppers – not just walking the store – really listening to what shoppers are saying: about them, but also about their changing needs.
Tesco have done well for a long time, and they still make £2.5bn profit. So they aren’t a basket case, but they have serious issues, and serious competition. They need to do something seriously radical – not just clean up stores and stick a few posters up…