TESCO adventure

TESCO started in 1919 as a grocery stall in the East End of London and turned to be one of the market leaders in UK. How did they achieve that? Of course, the mission statement helps if you stick to it. "To create value for customers to earn their lifetime loyalty". Now how do you actually create value for customers throughout decades. Obviously you have to be aware of the changing customer needs throughout change in generations. You have to not give them what you think is best but what they think is best for them. Honestly, a lot of companies can do that, sometimes even better than TESCO. That's probably why they couldn't outbeat Sainsbury's for a long time. The real challenge is to be ahead of time and to predict the customer needs. To predict the changes in behaviour and customer habits and to offer them something they really wanted without recognising that yet. In my opinion that's what TESCO did with first starting the Clubcard and then moving into the online world. They always had the first mover advantage. They involved technologies as and when needed in order to create and sustain their competitive advantage and the results confirmed their position.

In 1996 TESCO opened an online shop where customers could buy not only groceries but many other products from TESCO's warehouses. It was a huge success and shortly TESCO received the number one e-grocer on the Web title. In a short period of time their online sales increased 77% to 176 million UK pounds. I believe the move to the online arena and all the online features provided actually not only helped their online sales but also sales in their retail stores. With all the database of individual shopping histories they received extensive information about customer buying behaviour which they had no access to before.

However, there's still a challenge there for TESCO as online sales, while being profitable and providing more than 50% of the UK online market, only represent 1.5% of their sales. They obviously need to increase this number without hugely harming their sales in retail stores. I believe in order to do that they should be again thinking ahead of time. Although they had almost all features of modern online shops back in 1996, such as remembering the customer, offering products, price check etc, which I was amazed at, there's always room for innovation and improvement. They entered into the segment of handicapped customers which was innovative, however represented a very small niche market. Now they also expanded to US and have to adapt to US buying habits, but how could they succeed?

I believe, thinking ahead again and creating competitive advantage would be somehow to show the actual goods before they get delivered, offer a possibility to smell or touch.......I know the technologies are not there yet or are too costly to be profitable, but in my opinion this will come in some time. The world is moving towards less and less friction and I probably don't buy from online groceries just because I cannot see or smell or touch the product. To keep the sales in retail stores on the other hand, I would convert them into something more than a store, probably involve technologies there as well, e.g. a simple touch to a product could show who of your friends bought or liked the product. I'm thinking of my preferences, trying to think our of the box and be creative, but generation Y may think even more ahead...