Tesco boss claims consumers are starting to abandon discounters as brand shows ‘early signs’ of repair

Having today posted a £6.38bn annual loss, the worst in its 96-year history, Tesco chief executive Dave Lewis has insisted that the Tesco brand is showing ‘early signs’ of repair, and that customers are beginning to abandon doing their shop at multiple retailers.

Lewis, who was keen to point out that the significant pre-tax loss was a 90% balance sheet adjustment and only a 10% cash loss, said the retailer was heading in the right direction.

Tesco, which is gradually arresting profit decline, saw customer transactions, which have been in decline since the start of 2012, increase by 1.5% in the fourth quarter, with like-for-like volumes up 1% – the first time in four years.

“The fact there are more transactions and volume is up, with 250,000 more people coming to our stores, shows good vital signs for the health of the business and that we are starting to head in the right direction,” said Lewis at a press briefing today.

“Look, there’s definitely a trend towards convenience right now, but I think our Q4 numbers are showing that increasingly the most convenient thing for a shopper to do is to go to one big shop and buy everything in one.”

Pointing out Tesco’s improvement in customer service, its reduced ranges and significant price cuts, Lewis claims that those customer experience improvements have made it convenient to use one store again and are helping Tesco win back customers lost to Aldi and Lidl.

He added: “I think people have been going to more than one shop because nobody has excelled across the board when it comes to the in-store experience, we want to change that.”

Over the last six months, Tesco, which is 7th out of the UK’s 26 biggest supermarket brands, has significantly increased its YouGov Brandindex index score – which is measured by looking at consumer perception of quality, value, reputation and satisfaction – by 6.8 percentage points to 16.9.

This is an improvement that hasn’t gone unnoticed by Lewis.

“The brand indicators are improving, but it is still early days,” he stressed to Marketing Week. “The early signs are that we are being simpler with our offer and more competitive on price, and consumers are starting to see that integrity in our brand. But there’s a lot of work still to do.”

Tesco, over the four weeks ending 28 March [Nielsen], was the fifth biggest spender on advertising out of the UK’s biggest supermarkets, dropping its investment the most significantly. Lewis’ cautious approach saw ad spend fall by 138% to £3.1m, falling behind the discounters Aldi and Lidl.

However, Lewis hinted today that he will continue to be cautious when it comes to Tesco’s marketing spend.

“Yes, I am concerned about Aldi and Lidl’s ad spend but what I am learning in retail is the biggest impact you can have for someone’s appreciation of a brand is what they experience when they walk into your door,” Lewis responded to one question from Marketing magazine.

Lewis also pointed out that Tesco, despite scrapping 7,000 jobs due to closing unprofitable stores and cutting its head office size by 25%, now has more shop floor workers than it did when he took over last September.

He concluded: “This isn’t about having a conversation about the most share of voice, we are interested in the customer experience above all else right now.

When it comes to BBH and our other agencies, we can now articulate the brand and bring it to life in a way it hasn’t been in the past, but that will be through a combination of communication and improvements to the in-store experience.”