Tesco expands own brands, focuses on webshop

Tesco's strategy for the near future include a focus on its own-level brands and the conquest of online markets in the 14 countries the group is active in. Its CEO Philip Clarke announced that the world's third-largest retailer had seen its online sales grow 15% last year.
Today Tesco only has web shops in the UK, Ireland and South-Korea. Clarke announced he wants to make Tesco “an outstanding international retailer, in stores and online”. To spread his view, the new CEO – replacing Sir Terry Leahy who was CEO for over 14 years – has scheduled meetings with all of Tesco's over 5000 senior managers.
The new brands should create an added value, building on current examples like F+F (clothing), Technika (consumer electronics) or Go Cook (kitchen goods). The aim is to start own brands in fields as distinct as pharmacology and apparel. “When people develop higher levels of disposable income, they want to treat themselves”, Clarke told Reuters. “They do not want to just buy Tesco Value shower gel, they want to have something in their bathroom that looks like it is a brand. So we create brands.” Clarke also mentions that in any field, Tesco's own brands should embrace a rigorous definition of sustainability.
New markets, such as finance and telecom, should enhance Tesco's performance on its home market, and should afterwards be internationalised. The British Tesco stores could use some help from these new programs, because of the tough circumstances they are facing. High fuel prices, high taxes and the fear for massive job cuts under the new Cameron government have led to a mediocre year for Tesco standards.
“Our strategy has worked fine for over a decade, but now we need to adapt to the new situation.” said Clarke.  “In short, this is “a change of gear, not a change of direction.”

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Aldi invades inner cities

A few years ago, when Aldi UK opened a store in Manchester's city centre, the public opinion was that it was just a marketing trick: to open a hard discount store on such an expensive location could not be profitable. Now we know better: because of the economic crisis, the inner city stores are bringing in the biggest money.

Brilliant move

Aldi's new store in Queens (New York) is exemplary for the 'new look' Aldi in inner cities, says American retail expert Len Lewis. “New York is a fantastic market because of the high population density. The Queens store serves four times as many people as an average Aldi does. A marketing trick? More like a brilliant move!”

Not only Aldi, but also Lidl is keen on opening stores in such locations as Manchester city centre (like Aldi did) or the North London borough of Camden (like Lidl did). Retail expert Roberts points out that this is not a new evolution, but the internationalisation of an old strategy: “Although the typical Aldi location is on the edges of cities, several old Aldi stores have been built in city centres.”

Because of the current situation in the UK, where so many places in city centres and shopping centres are disused, this scenario is also possible there. Exactly the same economic situation that makes running a business in these locations so very difficult for most companies, makes it possible for hard discounters like Aldi to do so.

Two arguments in favour of city centres

High profile locations obviously cost more to rent, but Lewis sees two reasons why discounters should still consider opening stores there.  “Owners are more likely to lower their prices for respectable companies that are certain to pay the rent in time, than for a small store with a higher chance to go bankrupt.”

“The second reason is the very high population density in places like New York or Boston. These locations, while very expensive, have such a high number of shoppers – often inner city inhabitants who do not own a car – that these locations are still quite profitable. In the US, you have the example of dollar stores like Aldi's daughter Trader Joe's, who are very successful in both poorer city centre neighbourhoods and in the more expensive ones.”

There is however a big difference between the two Aldi chains. Aldi Nord (North Germany, Benelux, France, Spain and others) is much more conservative, while Aldi Süd (UK, Ireland, South Germany, Central Europe, Greece and the US) fully endorses this new policy.

- Pascal Kuipers, Alsano Communicatie

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Tesco ends Lowest Price Guarantee

Supermarket chain Tesco withdraws its “double the difference” price guarantee after finding out that certain customers abused the system. Tesco ended its campaign voluntarily, as opposed to Dutch chain Albert Heijn, who were forced to end their “always the lowest price!” guarantees which competition agencies found to be “misleading and unfair”.


Buy for £81, get £90 refund

Tesco started its “double the difference” campaign after competitor Asda claimed its prices were always “10% lower than any other supermarket chain”. In response, Tesco promised to refund any articles that consumers found cheaper elsewhere, and to double the price difference. 


Several customers took advantage of the scheme, using social networks and websites like MoneySavingExpert to share which supermarkets had short term promotions, buying there in large quantities and then reclaiming the difference, doubled, from Tesco. In one example, a customer bought a shopping cart full of items for £126 at Tesco, only to show that Asda's promotions had the price of the cart down to £81... earning him twice the difference (£90) in Tesco coupons.


Asda enjoys self-inflicted damage

Tesco's response of ending the programme after only two months was met with Schadenfreude by competitor Asda – who directly caused the campaign in the first place: “they made a promise they could not keep”. Managementtoday also blamed Tesco, stating that these customers did exactly what the programme was for: finding cheaper articles in other supermarkets and being rewarded with twice the difference. “So basically, Tesco is criticising customers for taking full advantage of a deal they'd been offered. Not exactly a PR triumph...”


Dutch supermarket chain Albert Heijn also revoked its Lowest Price Guarantee last month, after being forced by a competition agency. The Dutch chain had found out that its customers can be “overactive” too, and had during the two years of the Guarantee limited the application of its guarantee ever more. “In the Netherlands” became “in the same city”, “any item” became “one item per day” etc., until the programme was shut down completely. 

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