Tesco does it by the book to silence critics

Rumours abound that Tesco is set to introduce a bumper catalogue of non-food items in the UK, pitching itself against the likes of Argos. A launch is predicted some time in the next year, although there are few clues about the product ranges, or fulfilment arrangements. But while Tesco refuses to confirm such a move is imminent, analysts seem convinced it will happen.

It would make perfect sense. The UK’s top grocer is seeking to bolster its non-food offer both on- and offline, after opening its first dedicated Homeplus store in Manchester last year. According to reports, it is also looking to add furniture to its mix.

One definite announcement on the way is Tesco’s annual results. Its financial year ends this week, and analysts’ mouths are watering at the prospect of poring over the balance sheet. It has been quite a final quarter. The company announced a major foray into the US convenience sector, is seeking a retail joint venture in India, and aims to expand its Chinese operation.

On the down side, it is under fire from the media, consumers and other retailers, claiming it is bulldozing opposition off the high street. Even its advertising and “Every Little Helps” strapline have been labelled over-simplistic. The lack of celebrity endorsement in the campaigns adds to its “faceless” image, according to some observers, who say it faces a backlash similar to that against the might of Wal-Mart in the US.

Tesco recently upset Sainsbury’s, which has suspended its membership of the British Retail Consortium (BRC) following a row over the adoption of Food Standards Agency recommendations on food labelling. Sainsbury’s says BRC director-general Kevin Hawkins appeared to support Tesco’s opposition to the “traffic light” system proposed by the FSA. Tesco took out full-page newspaper ads to explain its position – ostensibly to sniping rivals as much as to consumers – ending with the comment/ “Well, it’s good to be informed”. Asda has also reviewed its BRC commitment but, as yet, remains a member.

It is up to the Competition Commission to decide if Tesco is sinning by amassing a huge land bank, or in its treatment of suppliers. But the retailer must be careful not to bite off more than it can chew. This is the concern of financial experts who watched French group Carrefour expand in the 1990s, only to get too big for its boots and retreat from some markets.

On the other hand, it could be argued that chief executive Sir Terry Leahy and Tim Mason, the former UK marketing director now running the US venture, have simply been awesome at following two key rules of marketing – identifying customers’ needs and fulfilling them – and coaxing the Tesco goose to lay the golden egg. Can anyone justify putting the skids under their bandwagon?

Tesco’s South Korean stores are held up as an example of how to run a “one-stop shop” – featuring internet access, financial services and even car repair shops – which would surely be desirable to a large chunk of the UK’s time-starved working population. The retailer will hope the prospective catalogue launch will boost its market share further, by appealing to consumers who would be only too happy to have everything under one roof.


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