Tesco Trails

A few weeks ago the “feel” of the university changed dramatically as the undergraduates and new postgraduates descended for the new semester. A sure sign Christmas is round the corner.

There are always plenty of students around in the summer – postgrads doing dissertations and projects and various summer schools and other classes (not the bagpipe school again – please). But the new semester with brand new first year students marks a changing of the seasons.

For some reason I was thinking of this when the Tesco interim results came out last week. The Tesco machine has spluttered in the UK in recent years – if still having a market share in food of over 30% can be called a splutter. Sales have been lacklustre (they are not alone in this), but market share has edged down.

And then it struck me. The first year students this year will have been born when Tesco was already the #1 food retailer in the UK. They will never have lived through anything else – and that is quite remarkable. For so long in my lifetime, Sainsbury were the prince of grocers, but in the early 1990s the upstart Tesco barrow-boys knocked them off #1 via a stream of initiatives – clubcard, value lines, express and metro stores, supply chain revolution, internationalisation, Every Little Helps corporate branding – which 20 years on. continue to deliver.

One other plank of the this #1 takeover was of course the purchase of Willie Lows (if you are one of my students you will have to ask your parents who they were) from the jaws of a Sainsbury takeover. Outbidding Sainsbury seemed rash at the time. but it made Tesco truly national (UK) for the first time and catapaulted upwards their previously limited market share in Scotland. if Sainsbury had held their nerve and outbid Tesco, how much would have been different in Scotland today?

A few other things caught my eye in the Tesco interims:

  • 65% of floorspace is now outside the UK
  • 49% of stores are now outside the UK
  • 34% of sales are outside the UK
  • 28% of profit is outside the UK

Tesco is truly international and increasingly reliant on its internationalisation for growth.

And in the UK? Much noise about The Big Price Drop, which for me is a rebalancing of approach. One of the lessons of the Sainsbury fall from grace was the way in which they got so out of line in consumers’ eyes on price. Tesco are determined not to do the same thing. Operationally they remain powerful.

One other snippet – between February and August 2011, Tesco added 150 stores to their UK portfolio, of which 142 were smaller than 3000 sq ft. Yes, some were One-stop, but even so.

Given this rate and format of development and Tesco’s ubiquity, it’s no wonder my students can not imagine anyone else being at #1. And yet, we said this about Sainsbury, once upon a time. Complacency in retailing is very dangerous – something Tesco are well aware of.

About Leigh Sparks

I am Professor of Retail Studies at the Institute for Retail Studies, University of Stirling, where I research and teach aspects of retailing and retail supply chains, alongside various colleagues. I am Chair of Scotland's Towns Partnership. I am also a Deputy Principal of the University, with responsibility for Education and Students.
This entry was posted in Competition, Consumers, Convenience stores, Food Retailing, International Retailing, Market Shares, Retailers, Tesco, Uncategorized and tagged , , , , , , , . Bookmark the permalink.

5 Responses to Tesco Trails

  1. Tarlok N. Teji says:

    Memories Memories!

    I was at Tesco in the early 1990s and then we were the third place retailer after M+S and Sainsbury. Still recovering from the 3 Guys international expedition and seriously thinking about Catteau (what a mistake that was). Learning is something most retailers do badly but Tesco does well. What was I really doing at that time apart from working for Tesco, an MBA at Stirling!

    I think Tesco has known that the UK business is competitive and not the great profit engine of the last 20 years. Most of their profits as you say, come from international operations and property plus non-grocery operations!

    Interestingly we will have to wait and see if this is a real change in strategy to reclaim their heartland operations.

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