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Tesco unveils trading strategy

Speaking at IGD's "a session with Tesco" event at the Madejski Stadium in Reading this week, senior Tesco representatives outlined the opportunities available for suppliers in the company's various routes to market. The key theme running through the event was convenience, delivered to consumers in a range of different guises: remote shopping, main stores and dedicated convenience stores.
Discussing the Tesco.com remote shopping service, Head of Commercial Development Kanaiya Parekh emphasised the scale of the scale which has now been achieved.
According to Tesco.com, it is now the world's largest online grocery business and the world's second largest online business overall (after Amazon.com). Using store picking, it is possible to offer delivery to 96% of UK households and the service now attracts 110,000 orders per week, with an average transaction value of Ł5.
On annual sales of around Ł350m in the latest year, the business generated an operating profit of Ł12m suggesting an operating margin of 2.7% - an impressive achievement in view of the higher costs inherent in the store-picking model.
Mr Parekh indicated that Tesco.com is now seen as a major means of driving LFL sales and seizing share from competition. He also demonstrated various mechanisms built into the website which are intended to match on-line shopping with the in-store experience by offering opportunities for:
 Customer sampling
 Highlighting special offers on "virtual gondola ends"
 Relevant banner adverts
 Internet-only promotions and e-coupons
 Links to selected supplier websites
 Full tracking and recording of customer activity
Taking the theme "small is big", Colin Holmes, recently appointed as Chief Executive Officer of the T&S Stores subsidiary, highlighted the growing demand for convenience shopping in the UK (IGD states that the sector is growing by 4.1% year-on-year). He urged suppliers to seize the opportunity by offering activities tailored to the convenience channel although it was recognised that convenience raises entirely different trading issues to the supermarket channel, hence the company favours simpler activities.
Speaking for the trading function, John Burry, Category Director for convenience and chilled foods, outlined the company's strategy for driving performance in its larger stores. This focuses around two key strands:
Improved Basic Skills
 No1 for availability
 Improved service
 Helping customers to spend less
 Fresh & full produce
Added Value Activities
 Better performance from new products (eg: new music launches)
 Refreshed "pillar" brands (eg: Value, Organics)
 Great seasonal events
 Serving local communities
 Driving overseas markets
 Building customer trust in foods
 Improving non-food ranges in medium-sized stores
 Improved clothing ranges
Availability was acknowledged as a concern for suppliers but one which is being addressed through improved internal procedures (now being piloted at Bishops Stortford). However, Mr Burry also called on suppliers to help reduce out-of-stocks by offering better shelf life and case sizes appropriate to specific store formats.
Buy-in prices were also acknowledged as a key issue but one which is difficult to address within Tesco's stated policy of being cheapest on branded items, cheapest on COD (cheapest on display or entry level) items and offering excellent value on items which are not directly comparable between retailers.
However, Mr Burry pointed to the volumes potential of the Tesco business and encouraged suppliers to revise products and business practices where it is possible to reduce cost without impacting on quality. He also announced plans for a simplification of the promotional programme, aimed at smoothing out expensive peaks and troughs in demand.
Speakers from Tesco were supported by Geraldine Jennings, Business Manager at marketing research house AC Nielsen, and James Walton, Senior Business Analyst at IGD.
Suppliers were thanked for their continued support to the business in helping to achieve the acquisition process so far without a loss of sales.
In a move to lay the foundation for launch of the Global Data Synchronisation Network,
Sourcer\ IGD

UCCnet and WWRE get together

UCCnet and the WorldWide Retail Exchange (WWRE) this week announced the commencement of a two-phased launch of interoperability to be completed by the end of this year. Ten WWRE retailers and suppliers will participate in the WWRE-UCCnet initiative, which aims to demonstrate the value of the GDSN and add considerable momentum to the industry's push toward the adoption of global standards.

CVS and Schering Plough will be the first two participants and have announced their intention to subscribe to UCCnet's GLOBALregistry.

"What we're doing is a first of its kind. We're showing the industry's commitment to cooperatively developing a global registry and creating an interoperable network of data pools around the world," said Leo Hartnett, VP of Efficient Consumer Response for CVS. "With a single process to synchronise information among all of our trading partners, we will eliminate confusion in the marketplace around the path to data pool interoperability."

Among the WWRE manufacturers and retailers backing this initiative are Ahold, Albertsons, CVS, Eckerd, Food Lion, Schering-Plough, Safeway, Walgreens, and Wyeth.

"The launch is especially significant because it brings industry leaders together to work collectively to develop one process for managing product data," said Jim Williams, Manager Business Information Logistics for Schering-Plough. "When you begin thinking about this globally, you can envision the sheer magnitude of the savings for the industry that will be derived from a single network of interoperating data pools."

Source Progressive Grocer

Efood Weekly News
Monday, May 19, 2003