Has the UK fallen out of love with Tesco?

17 Jan 2012|Kate Jones

Tesco* have felt the wrath of the UK press this week after its worst performance in many years. A raft of issues has been cited: from badly-designed stores, poor customer service, failure to meet shopper’s quality expectations, to, above all, price.

Behind these factors lies a deeper problem: shoppers have fallen out of love with Tesco. And the reasons are two-fold: the brand’s failure to emotionally connect with consumers and Tesco’s own blurred positioning. And the two go hand-in-hand.

Let’s look at how and why Tesco has failed to connect emotionally with their customer. The British shopper does not believe that ‘cheap’= good value for money. Moreover, the perceptions of getting ‘more for less = good value for money’ allied with Tesco’s stripped down communications and focus on the money promise which does not resonate powerfully enough.

A more upbeat view would be that conscious consumerism is spreading to the mainstream shopper. Tesco’s reported bully-boy tactics with suppliers (especially among British farmers) does not, and will not, win them friends either. Compare this to Morrisons, Waitrose, Sainsbury’s and, even Asda, which have talked up their focus on building mutual relations with their UK suppliers, while Tesco continues to focus on price. And, today, consumers are more aware of how supermarkets are able to offer such deals and still make huge profits, by squeezing the producer, and they feel less comfortable about that.

So, to positioning.

In the past, and over fifteen extraordinary years of growth (lest anyone forgets), Tesco has traded effectively on price and quality. But Tesco has always faced one big strategic threat from the discounters. Three years ago, fuelled by the credit crunch and the squeeze on income, the likes of Aldi started to make the in-roads into the British middle class in the way that they had succeeded in continental Europe. Tesco re-focused hard on value, introducing their own range of ‘discount brands’, even calling themselves ‘Britain’s biggest discounter’. That positioning was always dangerous as it left the door ajar for competitors to focus on quality. And that’s precisely what Sainsbury’s and Waitrose have exploited, particularly over the festive period, where they have recognised that Christmas is the time when shoppers switch most often between different supermarkets, and also have a tendency to trade up their shop.

However, for all the trouble with Tesco this week, and its growth curve was always due to peak at some point, with or without Sir Terry Leahy or Philip Clarke at the helm, there is also something very British going on here, we just don’t love a winner. Knocking the successful is a national sport, and Tesco is right up there as a prime target. So, ironically, the more successful they are, the harder they are going to find it to get their public to love them. But one way or another, Tesco is going to have to find a way back into their hearts if it wants to continue to take the £1 in every 7 that is spent in British shops.

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Added Value is quoted in The Observer‘s article ‘Tesco calls time on megastores after profit warning shock’.

*Tesco has stores in 14 countries across Asia, Europe and North America and is the grocery market leader in the UK (where it has a market share of around 30%), Malaysia, the Republic of Ireland and Thailand – (Wikipedia).

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