
Tesco: 'Wal-Mart's Worst Nightmare' - epi0Bauqu
http://www.businessweek.com/globalbiz/content/dec2008/gb20081229_497909.htm?campaign_id=rss_topEmailedStories
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sh1mmer
Some background: I worked on some Tesco online projects, I have friends who
have worked on their data mining. I'm British but I now live in California.

Tesco's data mining is easily the biggest operation I've ever seen. Everything
I did at Tesco had a large clubcard component. The clubcard was one of Tesco's
major innovations in Britain. It's not dissimilar to a Safeway card. Tesco
issue these things in keyfobs as well as card so you always have them.

I've seen people use their clubcard when they buy a newspaper. They don't save
money, they don't even get points, it's just habitual.

You can tell Tesco have really nailed data when you see their customer
demographic. I saw something in the Guardian (British newspaper) a couple of
years back which showed the Tesco customer wealth demographics matching the
population norm almost exactly.

When a retail group can organise their stores and retail inventory such that
every walk of life uses them they are on the road to success. Most people I
know in Britain that don't shop at a Tesco as their primary store have
competing store much closer to where they live.

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jderick
Those cards are annoying. I don't understand why they are necessary. Don't
most people use the same credit card anyway?

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aneesh
Some people pay with cash or check.

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axod
I don't think anywhere much accepts cheques in the UK any more. Perhaps some
shops, but it's unusual. Worst offenders are probably students paying for
drinks by cheque.

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pg
This sort of thing is one of the most convincing signs of how much future
growth there still is left in software. Companies of all types are effectively
turning into software companies. And this is still the beginning of the trend.

~~~
r7000
That reminds me of a Greg Egan short story where a doctor (in the near future)
laments that if he wanted to have the most impact helping cure disease he
should have gone into software design.

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bjelkeman-again
They describe the Tesco data mining tools in terms that make them look a lot
better (to me) than they feel when you see the result in the store.

Tesco opened a new flag ship store in London, UK, close to where I lived, in
Earl's Court. (This was a while ago, so I am sure they are better now. About 5
years ago.) This is in an area which has a number of competitors, all who had
fine tuned what the store offered to the local market. The area has people
with high income and a lot of (rich) immigrants, think Saudi, stock brokers
etc.

The Tesco store's range of products was awful for the first 12 months. It was
like they had drop-shipped a generic store, tuned for general suburbia, and
then slowly tried to fine tune it. 50% of what they sold seemed to be the
wrong stuff for the market.

They later opened a Tesco Express as well, just a couple of blocks away, and
compared to the Marks and Spensers Food Only store down the street (which
opened a year later) it was awful, really bad. I couldn't go in and actually
buy anything I wanted there other than maybe milk. I have visited recently and
the Tesco Express is still there, the same crappy collection of goods and
hardly anyone seems to buy anything. Whereas the M&S is packed.

It could well be that the area, Kensington / Earls Court, has such a special
set of clientele in it that the "standard" model of product provisioning for
Tesco just doesn't cut it. But I could have easily come up with a better set
of products to sell in there myself and I am just a customer not a retail
specialist.

So I guess I am saying that I think there is plenty of scope for improvement.

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fcjqbuvjxpxml
They are a lot smarter than Sainsburys. I lived in Belfast when Sainsbury
opened their first NI store. Their planning obviously just went
Belfast=Capital=London so they stocked exactly the same high-end products they
would in Earl's court, so 18 brands of extra-virgin olive oil but no bacon.

Tesco's system is smarter. There are 4 Tesco in Cambridge in different parts
of town and all have a different type of stock to fit the local market even in
such a small town.

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bonaldi
Tesco is expert at tailoring their ranges to exactly the sorts of local
customers. Most big chains try to standardise ranges across the entire company
in search of non-existent efficiencies.

Tesco realises that what a shopper in the poor area of Belfast wants is quite
different to a middle-class Glasgwegian, and it profits accordingly.

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halo
One of the key successes that Tesco had was managing to create a single brand
that appeals across all consumer ranges, selling both cheap and premium goods
under one core brand. Since then it's become ingrained on the cultural psyche
that you get few preconceptions of what a Tesco store is and who it appeals
to, it almost just "is".

In the UK, on the higher-end you have Waitrose and M&S Food, on the upper-
middle Sainsburys and (before it closed) Safeway, on the middle-to-low end you
have Morrisons and Asda and on the low-end Aldi and Lidl. Tesco totally
transcends that, selling budget ranges similar to Aldi and Lidl, having prices
comparable to the middle-to-low end supermarkets, and selling high-quality
goods similar to the high-end supermarkets. I was talking to my Dad about this
earlier and he was explaining in the 70s and 80s how Tesco were largely a low-
end budget supermarket and how this was a massive shift in the early 90s which
lead to them getting the upper hand on Sainsbury's in the market.

This was combined with a move towards large-format stores selling a mixture of
non-food goods which weren't popular in the UK until then, movement towards
smaller inner-city stores to extend their brand, the fact that unlike other
supermarkets Tesco had less of a north/south divide and, of course, the
Clubcard.

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cchooper
The genius of Tesco is that it's classless, which is exactly what the UK wants
to be.

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weegee
We shopped at Waitrose at Gloucester Road tube station in London, and there
was a Tesco Express right across the street. The prices seemed similar to us
but each store had a different selection. I don't remember being asked at
Tesco if I had a club card.

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pchristensen
Wouldn't universal prosperity be Wal-Mart's worst nightmare? Or sustained high
gas prices? Or Amazon?

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Prrometheus
If people became rich and the price-elasticity of demand dropped way off, then
a business model based on squeezing every last bit of inefficiency from the
supply chain and passing the savings onto consumers to gain market share would
be in jeopardy.

Sustained high gas prices? That'll push more people into its target
demographic. It will increase shipping costs, but that's a problem for all
Wal-Mart competitors, too.

I don't know if Amazon has any plans to target the down-market niche. I am
guessing that some things like clothing, food, and housewares most people will
never buy online. Also, I don't know that it will ever be as efficient to ship
to individual homes as it is to ship to large retail locations. So, I don't
think Amazon will ever win out on price.

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lliiffee
> Also, I don't know that it will ever be as efficient to ship to individual
> homes as it is to ship to large retail locations. So, I don't think Amazon
> will ever win out on price.

Maybe not, but that seems like the wrong comparison. The question is if it
will ever be as efficient to ship to individual homes as it is to ship to
large retail locations, _plus have people get to those locations to pick up
the goods_.

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Prrometheus
People seem to be accustomed to that, though. And they enjoy being able to
look through various options for a particular good in person. And the store
makes out when people buy things that they weren't planning on buying. And
most folks tend to batch trips (my family would take a trip to Wal-Mart about
twice a month and buy a lot).

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Retric
Over the past 2 years most of my durable goods purchases where though Amazon.
With amazon prime it's free 2 day shipping on most things which is fast enough
that I don't really care. With a low base price, zero shipping costs, and no
sales tax makes buying brand names online a lot cheaper and I don't need to
drive anywhere so it saves me a lot of time. On top of all of that I can
research stuff online so I don't have to worry about buying junk with a nice
package.

In the long run I think online shopping is going to win as long as shipping
costs stay low enough. Delivery costs relate to the number of packages drooped
off in the same area so they should drop as online delivery becomes more
popular. Toss in all the people who use catalogs and I expect a significant
portion of purchases don't require wondering though a physical store.

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dazzawazza
From a UK comedy program called Time Trumpet: The Tesco Wars

<http://uk.youtube.com/watch?v=20IpSch8sSk>

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diN0bot
i heard that tesco was planning to put carbon footprint on all their product
labels. has this been implemented? do they generally have an environmentally
friendly or social good philosophy about them, or is this new?

(my first thought when i hear of a huge super market that encourages
consumption and driving is not "that'll be good for the environment", but
perhaps their products reduce packaging and so on, which would make the
success of their own brand especially awesome)

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stcredzero
I remember walking up to the Tesco in Ennis. (I think it was Ennis.) From the
narrow little street I was on, there was just the glass doors visible,
squeezed in between some typical shops. I go inside, and it's this entire
sprawling supermarket. It was like the freaking T.A.R.D.I.S.

(Not big by American standards, but I'd been in Ireland for a week, and had
readjusted my sense of scale.)

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anthonyrubin
The supermarket and department store situation in Chicago is somewhat
interesting. In addition to the two major supermarket chains (Jewel and
Dominick's), we have six Whole Foods, three Trader Joe's, four Targets, five
Kmarts and exactly one Wal-Mart.

The sole Wal-Mart was only approved about four years ago and is far out on the
west side. Another Wal-Mart location was denied.

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jbjohns
Tesco looks like a solid competitor, though if I were them I wouldn't slow
down now. I would speed up while loans are hard to get. The longer they wait,
the longer Walmart has to use their dominance to finance completely
duplicating what Tesco has.

But as good as they are, the _real_ worst nightmare for Walmart is what it's
always been: unions.

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apgwoz
That's interesting. When I was in Thailand a few years ago, I thought Tesco
Lotus was a world-wide branch of Wal-Mart. I guess I never gave it a second
thought until now.

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zandorg
Same here - 4 weeks in Thailand and I saw a Tesco on a Southern island. I'm
from the UK so it was a surprise.

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pmorici
Doesn't Warren Buffet own a stake in Tesco?

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dangoldin
Yea. He's got around 2-3% of Tesco. He purchased shares back in 2006/2007
though.

Not sure what he's done since.

