The reincarnation of ex-Arcadia chief executive John Hoerner as Tesco’s new head of clothing has created something of a splash in the UK retail millpond. And for good reason.
This is a high-profile (if controversial) appointment clearly signalling that the UK’s largest and most profitable retailer means business in an area where, until now, it has only dabbled. Competitors, Asda most conspicuous among them, were clearly rattled by the announcement.
Strategically, the logic of Tesco’s move seems obvious. With retail outlet expansion pretty much at saturation point and food margins under pressure, the supermarket chain needs a new and profitable revenue stream. Fashion clothing, potentially margin-rich, seems to offer just the ticket.
What’s curious is the timing of the move: it’s a bit late to be sprinkling outside stardust on Tesco’s efforts. So far, these have been rather half-hearted. Tesco has come up with the Florence and Fred brand – promising, but not much more – yet overall it accounts for less than one per cent of the UK clothing market. This is a poor showing compared with Asda’s 2.6 per cent, garnered mainly through the services of fashion guru George Davies. Probably, Tesco was prepared to let Asda take the strain in pioneering what is after all a high risk area. No doubt it is also concerned by recent signs of revival at Sainsbury’s under the stewardship of Peter Davis; in particular, Davis’ hiring of fashion designer Jeff Banks to head its Jeff & Co clothing initiative. And it’s not stretching credibility to suggest that Tesco sees the chronic plight of Marks & Spencer as a golden opportunity to carve up some of the threadbare clothes middle market for itself.
But Hoerner to lead this effort? Many view the once-fÃªted retail dynamo as a spent force. A reputation built up by the turnaround of Debenhams in the early Nineties has, say the critics, been frittered away on the ill-considered acquisition of those Sears retail brands. They perhaps miss the point: it is Hoerner’s immense experience as merchandiser, marketer and supply chain expert that Tesco is buying, not his flawed track record in corporate acquisitions.
This will not be the first, or last, time that Tesco’s apparently oddball judgements are called into question. There was some light-hearted merriment over its approach to e-commerce several years ago. Tesco, it was felt, had failed to understand the spirit of the times when it opted for “Luddite” store-picking instead of state-of-the art warehousing logistics and technology. Currently, Tesco.com accounts for over half of all online grocery sales in the UK. In fact, so successful has its “clicks and mortar” approach to e-commerce been that, only this week, it was invited to sort out Silicon Valley’s GroceryWorks, majority owned by California’s biggest food retailer, Safeway. The same week that WebVan, Nasdaq’s once stellar online grocer, went bust.
We’ll find out soon enough who has the last laugh on the John Hoerner appointment.