The supermarket giant has, despite the trials and tribulations of recent years, maintained approximately 28% of all UK grocery spend – nearly as much as the next two members of the Big Four (Sainsbury’s and Asda), combined.
But last week’s surprisingly strong financials turned heads. The City analysts clearly didn’t expect it. Strong like-for-like sales and profit figures saw Tesco’s share price rise as much as 11% last week.
Marketers of any UK brand should take this moment to understand what we can learn from these numbers. And not for the Business School-lite analysis of an apparent retailer turnaround.
Tesco plays a unique role in British culture, let alone retail landscape. More people shop at Tesco each week than watch the X Factor. They are a bellwether business – mid-priced, mid-market.
Average people on average incomes in average towns spend more of their salaries with Tesco than anyone else. Understand them, and you understand Britain. You understand the people who buy your products.
And for those of us who are tasked with growing food and drink brands in any category, Tesco is a key concern. The saying goes, "You don’t have a consumer until you have a shopper". But you don’t have a shopper until you have a customer and Tesco are nearly everybody’s biggest customer.
So what is good for Tesco is good for you. We have to understand the path it's on, and begin to shape our own plans to synchronise with it.
The first thing that has worked for Tesco is a return to focus on their shoppers – understanding what they want. And at the heart of this is the underlying ability to deliver everyday value.
The mantra of EDLP (everyday low prices) is one that used to be bandied around by all the grocers, but then Aldi and Lidl came along and actually did it.
Tesco has reacted well. The Farm Brands range has been a great success. They are simple, affordable and good quality. Shoppers don’t seem to mind that they’re not from real farms. Tesco has also simplified promotions, and reduced the number of brands from their categories.
Overall, the message has been "Shopping with us is straightforward, and good value". And it seems to be working.
This effort has seen Tesco absorb costs that have reduced their overall margin. But signs are now that this margin can be rebuilt to levels seen pre "crisis". And this is because of the second core part of their successful strategy – giving people a reason to shop there.
The communications have added a bit of personality to the brand, but the biggest changes have been at stores that have previously been too big to work.
The larger stores have become destination sites. Partnerships with the likes of Arcadia and Holland & Barrett have helped. But perhaps more than this, Tesco has been relying on the household name brands that people love to create a sense of interest and excitement each time people shop with them, making the overall big-shop experience worth doing.
It’s something that Aldi and Lidl simply can’t do. So if you want to win with Tesco, think about how you can contribute to this, while ensuring it’s not at the expense of value.
Rob Sellers is the managing director of GreyShopper London.
