News: Tesco records £6.4bn loss in 2014

23 Apr 2015|Added Value

A media buzz occurred this week surrounding Tesco’s announcement on their loss of £6.4bn in 2014. The most significant loss ever seen for a UK retailer. Here at Added Value we considered what that meant for Tesco, and if indeed ‘it can only get better from here’ as many hailed.

 

“This is a huge loss but I think what we’re seeing is Tesco bottoming out. A lot of the hard decisions have already been made with the recent staff cuts and store closures.

That said, the retail landscape has shifted and the draw of big superstores are a thing of the past. Shopping habits have dramatically changed so it’s not surprising Tesco is losing market share to discounters such as Aldi and Lidl. Tesco no longer have a better differentiator to entice customers to shop with them because others are delivering their price promise better. They’ve lost their purpose in the minds of consumers and it’s unlikely we’ll see Tesco regain the dominant position it once held anytime soon. To recover from their losses and become a loved supermarket again, Tesco need to understand what consumers really want and be relevant to the shopping landscape of today and tomorrow.”

Robin George, Insight Associate Director

 

“Over the years Tesco have really driven home their ‘low price’ message without offering more to consumers. They built out-of-town mega stores and moved into high streets, so local stores began to close and people started to fall out of love with the brand. When new entrants came into the market also offering low price they brought something else – the likability factor that Tesco had lost. If other brands have the same message as you and you have lost that connection with your consumer, then the writing is on the wall for your brand.”

Sarah Overin, Insight Project Director

 

“Tesco became an extremely successful UK supermarket by being the ‘consumer champion’. But in recent years they’ve diversified way too much and in every aspect – international expansion, entering various new categories, across all channels, and trying to meet all consumer needs. Tesco’s stood for too much and for too many people with an unfocused strategy. While at the same time the grocery market in the UK has significantly changed and become more polarised. Waitrose is growing share for the premium end while discounters, Ald & Lidl in particular, have become much more acceptable for the mid-range shopper. Resulting in the supermarkets in the middle being squeezed. Tesco needs to decide where it will focus – which categories/markets/customers – and invest in those without trying to take over the world.”

Inese Smidre, Brand Project Manager

 

“We haven’t stopped shopping in Tesco overnight, and part of this loss is due to a fall in the value of their property rather than sales. But it is a sign that the Tesco model is on the wain. Huge stores and selling mountains of products on multi-buy offers is slowly losing appeal. Rather than having more stuff, we value having the right stuff – where and when we want it.

Tesco must adapt both its shopper model and its brand –providing a store where people can shop on their own terms and not feel dictated to by promotions, and building a brand that feels in tune with today: it’s not about having more, it’s about having exactly what we want.”

Anna Loughran, Insight Project Director

 

Tesco have a long road ahead of them to gain trust and return to the hearts and minds of consumers as a loved brand. A fact not lost on Dave Lewis. The question is how to achieve that. Price was their promise, yet lost their price integrity from too many promotions and were undermined by discounters offering consistently low prices combined with quality. So what is their role in the retail market now? They need to define their purpose by understanding what consumers want and need – offering something that feels desirable and relevant. Then stick to it with unwavering commitment.

 

Robin George’s comment was published in The Guardian and The Grocer.

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