Once the most successful supermarket chains in Britain, Tesco has seen its fair share of struggles throughout the economic crisis. With falling share prices, tough competition from rival brands such as Asda and Sainsbury’s and controversies over workers all plaguing the brand in recent months, it is hardly surprising the group posted its first profit drop in twenty years earlier this week.
However, the chain is doing everything it can think of to draw disillusioned customers back through the doors of its nationwide outlets by investing £1 billion into a revamp of stores. This, it hopes, will make shopping a more pleasant experience for consumers and encourage brand loyalty in even the harshest of Tesco’s critics.
As part of the turnaround scheme, Tesco plans to introduce a “Drive Through” service to 150 of its stores, otherwise known as a click and collect initiative. Basically, customers place their order on the Tesco website then drive to their nearest participating branch where they can collect their shopping pre-bagged and ready to take away.
The benefits of this initiative are twofold. Firstly, customers need not wait in their homes for their shopping to be delivered, thus freeing up some time in their day and making the process smoother. And as for Tesco, the company will no longer have to employ quite as large a fleet of vans and drivers, although the delivery option will still be available for the foreseeable future.
Customers choosing to use this service will have a £2 surcharge added to their shopping bill, but this is lower than the £5 currently charged for delivery. The charge is to cover the time it takes for employees to locate, scan and pack the items.
Meanwhile, chief executive Phil Clarke has made the decision to sell off or rent out space in several Tesco Extra supermarkets, after admitting last month that the supermarket “space race” is no longer yielding positive results for the retailer.
Over the past decade or so, consumers were hard pressed to find a town near them which did not have a Tesco store in it, whether this was a giant Tesco Extra hypermarket or one of the small Tesco Express convenience stores. Yet Mr Clarke admitted that this expansion has turned out to be a mistake in hindsight, as the chain invested in too much commercial property in too short a period of time.
Unfortunately, Tesco’s woes are not solely due to the struggles of the UK branch. Internationally, the retailer is struggling to perform, with American brand Fresh & Easy also struggling to become profitable.
As a result, the chief executive is facing increasing pressure from shareholders to either turn the American business around or cut his losses and sell it to a competitor.
Mr Clarke said; “Fresh & Easy needs to be able to demonstrate it can create value and that is what we are focused on.
“My commitment here is to deliver value for shareholders. I have to make sure that the business can persuade me of this and then I can persuade shareholders.”
In the meantime, Mr Clarke has made the decision to freeze store expansion in America and hired extra staff to man self-serve checkouts in a bid to make shopping at Fresh & Easy a more personal experience.
Do you think the Drive Through option will encourage more shoppers to frequent Tesco stores, or do you think the competition from rival brands is simply too strong for the retail giants to compete against? Should Tesco cut back on the unprofitable areas of their international market to focus on their relationship with consumers in the UK?
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