Transcript Kein Folientitel

1
Introduction
Clubcard
Tesco.com
http://www.andidas.com/
Non-Food
2
Introduction
Clubcard
Tesco.com
http://www.andidas.com/
Non-Food
3
Introduction
Introduction
Clubcard
Non-Food
Tesco.com
Tesco
Sainsbury’s
ASDA
Safeway
Morrison
Other
1987
8.5
10.0
4.9
5.9
1.5
69.2
1990
9.8
11.3
7.0
7.1
1.7
63.1
1995
13.6
12.5
7.2
7.2
2.4
57.1
http://www.andidas.com/
2000
16.1
11.6
9.5
7.7
3.2
51.9
2004
19.2
10.8
11.2
9.7
49.6
Source: IDG, TNS, Keynote, Frontier
UK Grocery Retailing, 1987-2005
4
Introduction
Introduction
Clubcard
Tesco.com
Non-Food
Tesco’s Growth Strategies
More to existing
customers in
existing stores
How to
increase
sales
New customers
in new channels
Products
Expanded non-foods
Services
Financial services
Hypermarkets
Convenience stores
Internet
New geographies
http://www.andidas.com/
5
Introduction
Clubcard
Tesco.com
http://www.andidas.com/
Non-Food
6
Introduction
Clubcard
Clubcard
Tesco.com
Non-Food
Why do retailers invest in loyalty programmes?
Champion
Key goal is to increase customer loyalty
All customers can be placed at
some point in this 3-D cube
A customer’s location in the cube
suggests actions suitable to earn
his/ her lifelong loyalty
Commitment
• Contribution: profitability today
• Commitment: future value
- likelihood of remaining a customer
- ‘headroom’
• Championing: ambassador
Consumer
Scoring Points (2003), Humby et al
Contribution
http://www.andidas.com/
7
Introduction
Clubcard
Clubcard
Tesco.com
Non-Food
Why do retailers invest in loyalty programmes?
For a loyalty programme to be effective, it must increase contribution,
commitment, and championing
Attitudes that must be created by
programme
Retailer becomes customer's first choice
Customers spend larger share of wallet in
the retailer's stores instead of rivals' stores
Customers buy additional products and
services from retailer
Customers are willing to recommend retailer
Customers have high overall satisfaction
Behaviour generated by attitudes
Retention of existing customers
Recruitment of new customers
Volume of buying increases Contribution
Diversity of products increases
Recommendations attract new
Championing
buyers
Disinterest in switching to
alternatives
http://www.andidas.com/
Commitment
8
Introduction
Clubcard
Clubcard
Tesco.com
Non-Food
But if everyone does the same thing, isn’t it a zero sum game?
If all retailers are able to copy one another’s moves, we would not expect customers to
become loyal to a particular retailer
Year
Competitors’ Response
1995
Sainsbury launched the Reward Card
1996
Safeway launched its ABC Card
1996
Asda introduces it loyalty schemes in selected stores
1999
Asda abandons its loyalty scheme and focuses on keeping
the prices low
2000
Sainsbury abandons Reward Card
2000
Safeway abandons ABC Card and focuses on price
reductions
2001
Sainsbury joins Nectar group
But by 2005, Vodafone and Barclaycard had exited the Nectar group and Nectar is struggling to
catch up with the Clubcard phenomenon
http://www.andidas.com/
9
Clubcard
Clubcard
Introduction
Non-Food
Tesco.com
Tesco has been able to outwit and outlast most competitors
After lagging Sainsbury for many years, Tesco’s newly launched Clubcard programme
allowed it to leapfrog the leader in just 6 months in 1995:
1995
Jan
Feb
Mar
Apr
May
Sainsbury
19.4
19.0
19.1
18.7
18.8
Tesco
18.1
18.5
19.3
19.9
19.4
Supermarket UK market share (%) (Source: Taylor Nelson Sofres)
The launch of Clubcard increased Tesco’s sales by 28% and reduced Sainsbury’s
sales by 16% in 1995 alone
By 2005, Tesco's Clubcard has more than 10 million members who collectively make up 75 per
cent of the company's UK transactions and 82 per cent of its UK turnover.
What is so unique about the Clubcard that has allowed Tesco
to achieve such overwhelming success?
http://www.andidas.com/
10
Introduction
Clubcard
Clubcard
Non-Food
Tesco.com
To underpin the success factors, we conducted some research …
Based on a questionnaire with a sample size of 100, we identify key areas in which Clubcard has
performed significantly better than other loyalty cards
Mean
5
4
3
Tesco
Others
2
http://www.andidas.com/
5
6
Clubs in scheme
4
Integration with
online shopping
3
Personalised
treatment
2
Partners
in scheme
1
Frequency
of rewards
0
Relevance
of rewards
1
Discount
Customers like the Clubcard
programme mainly due to the
personalised treatment they
receive and the relevance of
rewards
7
11
Introduction
Clubcard
Clubcard
Tesco.com
Non-Food
You are What you Buy – Innovative Customer Segmentation
It is Tesco’s creative approach to customer segmentation that has allowed it to offer
more personalised treatment and relevant rewards than competitors
Data insights are the foundations of Relevance
(1) Tesco does data mining
(2) Identifies customer profiles/ lifestyles
(3) Responds to different segments’ needs with
tailored rewards
(4) Improving product lines
based on Clubcard data
http://www.andidas.com/
12
Introduction
Clubcard
Clubcard
Tesco.com
Non-Food
You are What you Buy – Innovative Customer Segmentation
(1) Data mining Key advantage of the Clubcard scheme is the ability to gain data insights
from customer behaviour:
Customers must provide basic geo-demographic details when registering
Tesco is able to use the card to link the customer with their transaction
Time series of transactions can be formed to provide a
chronicle of every customer’s individual buying habits
Lifestyle segments are created based on an analysis of both
geo-demographic and actual behavioral transaction data
Now possible to infer why customers make certain decisions, not just who, what,
when, and how much … …
http://www.andidas.com/
13
Introduction
Clubcard
Clubcard
Tesco.com
Non-Food
You are What you Buy – Innovative Customer Segmentation
An example:
Mr. X’s typical receipt
Address: 66 xx Kensington, London, SW1
Can be profiled as
non-budget,
conveniencedriven customer
Contact no: 07339 884893
Age: 53
Number of people in household: 1
Special dietary requirements: no red meats
Mr. X
Finest pre-packaged Chicken Tikka Rice:
Someone who values quality and lacks time to prepare food
Tropicana orange juice:
Someone who is not very price sensitive and values quality
Expensive pre-cut, prepared fruit:
Someone who is not price sensitive and values convenience
http://www.andidas.com/
14
Introduction
Non-Food
Tesco.com
Clubcard
You are what you buy – innovative customer segmentation
(2) Customer profiles/ lifestyles
Average
Score
Product Attributes
Easy to consume
85
90
80
85
High quality
90
90
90
90
Healthy
85
60
50
65
Innovativeness
70
60
80
70
0
0
0
0
Cooking
from scratch
http://www.andidas.com/
Classified as
non-budget/
convenience
lifestyle
15
Introduction
Clubcard
Clubcard
Tesco.com
Non-Food
You are what you buy – innovative customer segmentation
Source: Coriolis, 2004
Source: Coriolis, 2004
Customer segmentation
Brands launched to target
segments
http://www.andidas.com/
16
Introduction
Clubcard
Clubcard
Tesco.com
Non-Food
You are what you buy – innovative customer segmentation
(3) Tailoring rewards to various customer segments
People who join loyalty programmes expect relevant rewards
Each member of the Clubcard scheme receives a personalised pack
containing a mailing, product-specific advertisements, and vouchers
Our research indicated that many people ranked Clubcard’s rewards
as more relevant than those of competitors
This is because Tesco tailors its rewards – Tesco has 8 million
variations of its quarterly mailings sent out to 10 million Clubcard members,
with targeted vouchers and advertisements catering to their differing
lifestyles and geo-demographic circumstances
For instance, Tesco ensures that it does not send meat vouchers to health conscious
vegetarians, and focuses on issuing vouchers for low-calorie products and articles on keeping fit
Tesco also has dedicated clubs (eg. Baby club) that cater to different
customers in various lifestages
http://www.andidas.com/
17
Introduction
Clubcard
Clubcard
Tesco.com
Non-Food
You are what you buy – innovative customer segmentation
(4) Improving product lines based on Clubcard data
If Tesco identifies that Special Dietary Spreads are doing poorly in
growth, they can use Clubcard data to identify the problems
Source: Dunnhumby website
‘Healthy’ consumers are skewed towards Special Dietary Spreads
http://www.andidas.com/
18
Introduction
Clubcard
Clubcard
Tesco.com
Non-Food
You are what you buy – innovative customer segmentation
Tesco can examine which customer groups are driving category
performance – since ‘healthy’ consumers were shown to be extremely loyal
towards Special Dietary Spreads (SDS), we would predict the highest growth in spend
on SDS to come from the ‘healthy’ group if the SDS product line is relevant to them
Source: Dunnhumby website
BUT actual results show that growth of SDS is one of the lowest in
the ‘healthy’ segment – this implies that Tesco may be selling the wrong SDS
products in its stores, and thus it has to improve its SDS selection to improve growth
http://www.andidas.com/
19
Introduction
Clubcard
Clubcard
Tesco.com
Non-Food
You are what you buy – innovative customer segmentation
Identifying new opportunities in SDS:
Source: Dunnhumby website
Healthy customers are increasing their spend mainly on 2 products
within SDS (Benecol and Pro-Activ) – Tesco can lock in healthy shoppers
by launching new Benecol and Pro-Activ products (eg. 1Kg versions)
http://www.andidas.com/
20
Introduction
Clubcard
Clubcard
Tesco.com
Non-Food
Loyalty programmes are costly
Loyalty programmes are extremely
expensive.
Even if a loyalty scheme can increase sales
revenues, it can lead to reduced profits if the
costs are not minimised.
But Tesco has been successful in
minimising costs as well!
http://www.andidas.com/
21
Introduction
Clubcard
Clubcard
Tesco.com
Non-Food
Why Clubcard is more cost - efficient than others
1) More value from marketing expenses
Tesco’s advertising costs are not significantly
higher than those of other big retailers, and still its
sales growth and market share are above
industry average
http://www.andidas.com/
22
Clubcard
Clubcard
Introduction
Tesco.com
Non-Food
Clubcard’s cost effectiveness (1/3)
Making mass marketing very niche
Direct communication with customers
Tesco Magazine
Magazine segmentation
based on lifestyle segments
64% of customers claimed
they are likely to buy
products because of the
articles they read in the
magazine
Able to charge 6 times
higher prices for the
space in the media
Market research “in house”
All market research is
carried out with the use
of Clubcard data and
focusing on individual
customers.
Tesco sells data to
other retailers and
suppliers
http://www.andidas.com/
Targeted Promotion
8 million variations of
quarterly mailings
Highly personalised
vouchers and rewards
23
Introduction
Clubcard
Clubcard
Tesco.com
Non-Food
Why Clubcard is more cost - efficient than others
2)
Discounts are mainly
supplier funded
According to the Competition
Commision Report: “Tesco engages
in the practice of requiring or
requesting suppliers permanently to
reduce the previously agreed
wholesale price of products in support
of the marketing initiatives with which
the price initially was associated”
This approach generated demand and
preserved margins for Tesco
http://www.andidas.com/
24
Introduction
Clubcard
Clubcard
Tesco.com
Non-Food
Why Clubcard is more cost - efficient than others
3)
Clubcard data facilitates
targeted pricing strategies
Look for price-sensitive consumers
Identify the products they buy and
others don’t
Lowering the prices of those
products
By not knowing their customers, many
retailers are effectively wasting their
money on price cuts that could be
targeted to people who want them
because they need them.
The targeted price cuts enabled Tesco to
attract more shoppers from competitors
and capture the volume that supported
the lower prices.
…which resulted in over 60% fewer
promotions, reduced management cost,
further contributing to price reduction,
and more tailored, effective promotions.
http://www.andidas.com/
25
Introduction
Clubcard
Tesco.com
http://www.andidas.com/
Non-Food
26
Introduction
Clubcard
Tesco.com
Tesco.com
Non-Food
UK Online Retail Grocery Market, 2005
Waitrose &
Ocado, 5.5%
ASDA, 15.5%
Sainsbury's,
15.9%
Tesco, 65%
Source: Verdict, Keynote, Hitwise
http://www.andidas.com/
27
Introduction
Clubcard
Tesco.com
Tesco.com
Tesco.com VS Sainsburystoyou.com
Feature
Link with loyalty card
Delivery coverage
Link to services (e.g. finance)
Delivery charge
Assortment offered in non-food
Minimum order
Order tracking, cancelling
Shopping guide for new users
Product search
Online virtual shopping list
Shopping idea lists
Popular item lists
Price comparison
Recipe ideas
extra features
yes (Clubcard)
98%
yes
£3.99-5.99
wide
none
yes
yes
yes
yes
yes
yes (Nectar)
74%
fragmented
(microsites)
£5
narrow
£25
no
no
yes
no
yes, but
very limited
yes
no
yes
no
yes
yes
travel booking,
choice of
energy providers ripeness of fruits
http://www.andidas.com/
Non-Food
28
Introduction
Clubcard
Tesco.com
Tesco.com
Non-Food
Tesco.com
ž First mover advantage
ž Switching cost
Ÿ Shopping basket (used by 92% of shoppers)
Ÿ Customer management (touch strategy)
Ÿ Convenient and efficient site design
ž
ž
ž
ž
ž
Offline advertising in store for Online offer
Clubcard: low cost of winning new customers
Integrated offer of non-foods goods, partnering
Ebay way of introducing new categories
Industrialisation of the picking process
Ÿ Picking trolley, shelf identifier, lean supply chain management
http://www.andidas.com/
29
Introduction
Clubcard
Tesco.com
Tesco.com
Non-Food
Comparison of alternative grocery models
Break-even analysis
Cost element
Grosselement
margin
Cost
Labour cost
Adminstration
cost
Net
margin
Advertising
cost
Average order size
Depreciation
cost
Investment
required
Other expenses
Orders
needed to payback (million)
Delivery cost
Total operating expenses
Net margin
Capital expenditure (£ million)
Internet
only
Internet
23.00%
only
3.33%
1.50%
-4.38%
10.00%
£85
0.75%
113
1.00%
10.80%
27.38%
-4.38%
113
Brick&click
in-store picking
Bricks&mortar
Brick&click
In-house
Outsource In-house
Outsource
Brick&click warehouse
in-store picking
23.00%
23.00%
23.00%
23.00% Bricks&mortar
23.00%
3.33%
3.33%
5.00% Outsource
5.00%
9.50%
In-house
Outsource
In-house
1.50%
1.50%
1.50%
1.50%
2.00%
8.26%
7.42%
6.50%
5.66%
1.60%
2.50%
2.50%
2.50%
2.50%
1.50%
£85
£85
£85
£85
£85
1.01%
0.75%
0.40%
0.14%
1.40%
113
84
44
16
157
1.00%
1.00%
1.70%
1.70%
7.00%
16
13
8
3
115
5.40%
6.50%
5.40%
6.50%
0.00%
14.74%
15.58%
16.50%
17.34%
21.40%
8.26%
7.42%
6.50%
5.66%
1.60%
Brick&click warehouse
113Outsourcing
84
44
16 advantage
157
has operational
over its counterpart
Source:
Lehman Brothers. Interviews with relevant Companies' Investor Relations departments
No player chose outsourcing. Why?
http://www.andidas.com/
30
Introduction
Clubcard
Tesco.com
Tesco.com
Non-Food
Why didn’t Tesco outsource e-grocery logistics?
Asset specificity - high
In-house cost > market cost
Economies of scale - moderate
Shared system in material handling,
Outside supplier
cannot transportation,
order processing,
easily aggregate
& inventory management
demand with other clients
T
Labour specialisation
Supplier
Scale of transaction - large
Asset
specificity
System covers the entire country
A
In-house cost < market cost
Cost associated with
hold-up,Tnegotiation,
=
Min in-house production cost
Produceand writing contract
–
In-house
Min arm’s length market production cost
http://www.andidas.com/
31
Introduction
Clubcard
Tesco.com
Tesco.com
Which e-grocery mode is better? (1/2)
Aspect
Investment required
Technical efficiency
Expansion
Capacity
Proximity to buyers
In-house
picking Dedicated warehouse
In-store picking
minimal
lower
fast
small
near
large
higher
slow
large
far
Generally, the decision whether to adopt warehouse
depends largely on the estimates of:
Market size
Market growth
Percentage of market captured
http://www.andidas.com/
Non-Food
32
Introduction
Tesco.com
Tesco.com
Clubcard
Non-Food
Which e-grocery mode is better? (2/2)
High growth (p = .5)
In-store
picking
238
Brick&click
238
in-store picking
Bricks&mortar
Cost element
Calculating Free Cash Flow
-44 In-house
167.5Outsource In-house Outsource
Low growth (1-p
= .5)
Growth rate:
20.0%
RRR:
5.0%
Gross margin
23.00%
23.00%
23.00%
23.00%
23.00% 97 23.00%
Labour
costpicking- high growth
3.33%
3.33%
3.33%
5.00%
9.50%
1997
1998
1999181 5.00% 2000
2001
I. Instore
Go online
97
1.50%
1.50%
1.50%
1.50% 193.51.50%
2.00%
Adminstration
cost
sales
112.0
134.4
161.3
232.2
Less:
Total
operating
expenses
18.5
22.2
26.6
31.9
38.3
2.50%
2.50%
2.50%
2.50%
1.50%
Advertising cost
0
167.5 10.00%
EBIT
93.5
112.2
134.7
161.6
193.9
High
growth
(p
=
.5)
0.75%
1.01%
0.75%
0.40%
0.14%
1.40%
Depreciation cost
Less:
Income
taxes
(40%)
37.4
44.9
53.9
64.6
77.6
1.00% Dedicated
1.00%
1.00%
1.70%
1.70% 178 7.00%
Other expenses
EBIAT
56.1
67.3
80.8
97.0
116.4
178
291
warehouse
10.80%
5.40%
6.50%
5.40%
6.50%
0.00%
Delivery
cost
Add: Depreciation expenses
0.4
0.5
0.6
0.8
0.9
27.38%
14.74%
15.58%
16.50% 0.617.34%
21.40%
Total
operating
Less:
Change inexpenses
Net working Capital
0.0
0.5
0.3
2.7
-113
105.25 7.42%
-4.38%
8.26%
6.50%
5.66%
1.60%
NetFree
margin
Cash Flow
56.6
67.4
81.1
114.6
Low growth (1-p97.1
= .5)
167.5
Internet
only
Present
Value
Capital
expenditure
(£ million)
354.8
113
Brick&click warehouse
113
84
282
145.544
32.5
16
32.5
Source:
Lehman Brothers. Interviews
relevant only
Companies' Investor Relations departments
Brickwith
& mortar
0
0
0
http://www.andidas.com/
157
33
Introduction
Tesco.com
Tesco.com
Clubcard
UK Retailers’ Online Delivery Strategies
In-store
picking
sell online
Dedicated
warehouse
pureplay:
Brick & mortar only
http://www.andidas.com/
Non-Food
34
Introduction
Tesco.com
Tesco.com
Clubcard
Non-Food
The predicted value of UK E-Commerce (1997)
10,000
million pounds
8,000
6,000
4,000
2,000
0
Datamonitor
Optimedia
1998
1999
2000
2001
2002
37
118
280
490
1,207
400
1,200
2,500
4,700
6,300
7,200
2,580
3,000
NOP
9,500
2,730
IDC
Jupiter
2003
101
MSDW
DTI
390
Fletcher
230
Real
424
189
384
730
1,404
118
279
490
1,204
3,000
1,056
2,277
3,487
quoted in Foresigth, 2000, Retail E-Commerce
http://www.andidas.com/
5,062
35
Introduction
Tesco.com
Tesco.com
Clubcard
Non-Food
Tesco.com as a niche market
Tesco’s sales VS online sales
Planning for e-grocery
Sales (£M)
Tesco’s online sales
40,000
800
Analysis of
market demand
Consumer
700
research
35,000
30,000
600
25,000
500
400
Is demand potential
sufficient in the region?
yes
300
no
20,000
15,000
no
10,000
200
Does return
on warehouse
Despite Tesco.com’s
success,
justify
additional
its e-grocery
unitits
remains
as investment?
a
100
5,000
small part
yes
0
Additional
97
98
99
1
2 investments
3
400for e-501
grocery have to be weighted
Adopt ROI
warehouse
against
of other projects
approach
02
6
03
7
0
04
8
91
2
1 92
Adopt in-store
picking approach
05
993 94 95 96 97
6 7
5
4
3
Total sales
End
http://www.andidas.com/
98
8
99
00 11
01
9 10
02
15
14 05
13 04
12 03
Online sales
36
Introduction
Clubcard
Tesco.com
http://www.andidas.com/
Non-Food
37
Introduction
Clubcard
Non-Food
Non-Food
Tesco.com
Expansion into Non-Food
UK Grocery Market Saturation
Diversification into Alternative Non-Food Markets
N-F Consumer Products
Services
Apparel
Personal
Electronics
Finance (TPF)
Household
Telecoms / Mobiles
Health & Beauty
Entertainment
http://www.andidas.com/
Travel
DVD Rental
38
Introduction
Clubcard
Tesco.com
Non-Food
Non-Food
Why Tesco has Targeted Non-Food
Core Grocery Market Saturation:
Stagnation, intense competition & price deflation: seek alternatives.
Diversification Opportunities:
Potential to exploit weaker competition and higher margins (cross-subsidize core
groceries).
Threat of Competition:
Industry trend: Asda already established, others to follow. Early-mover advantages.
Synergies:
Benefit from existing resources and competencies inc: store networks, distribution
& logistics infrastructure, management experience.
Competitive Advantage:
Key competitive differentiator. Offer attractive diversified product lines: set goal of
“being as strong in non-food as we are in food.”
http://www.andidas.com/
39
Introduction
Clubcard
Tesco.com
Non-Food
Non-Food
Shares of Non-Food Market
4.5
4
3.5
%
3
2.5
1999
2
2004
1.5
1
0.5
0
Tesco
Asda
Sainsbury's
http://www.andidas.com/
Morrison's
40
Introduction
Clubcard
Tesco.com
Non-Food
Non-Food
Tesco’s Virtuous Cycle of Non-Food Expansion
Scale economies
Growth /
expansion
Virtuous Cycle
Lower prices &
higher margins
Control of
Supply chain
http://www.andidas.com/
41
Introduction
Non-Food
Non-Food
Tesco.com
Clubcard
Consumer N-F Products: Apparel (Clothing)
Clothing is the most important market for Tesco within non-foods, with sales accounting for
40% of the total non-food portfolio.
The UK Market is highly competitive with a range of traditional high street and discount
retailers. Supermarket entrants have driven price deflation and captured market share
12
10
6
2003
4
2004
2
M
&S
Ar
ca
di
a
ex
t
N
D
eb
e
nh
a
m
s
As
da
0
co
%
Te
s
%
8
http://www.andidas.com/
Tesco’s clothing sales grew
28% in 2004 to £700m,
doubling its market share
from 0.9% to 1.8%;
42
Introduction
Clubcard
Tesco.com
Non-Food
Non-Food
Clothing: Brand Comparison
Firm
(sales B£)
Pricing
Range
Fashion /
image
Store
network
Promotion
Overall
rating
M&S (3.4)
Average
Good
Poor
Good
Poor
Medium
Next (1.8)
Average
Good
Average
Good
Average
Medium
Arcadia (1.7)
Poor
Good
Good
Good
Good
Medium
Asda (1.3)
Good
Good
Good
Average
Good
Strong
Matalan (1.0)
Average
Good
Average
Average
Poor
Weak
BHS (0.9)
Average
Good
Poor
Average
Poor
Weak
Primark (0.6)
Good
Average
Average
Average
Average
Medium
GAP (0.4)
Weak
Average
Average
Average
Average
Strong
H&M (0.4)
Average
Good
Good
Average
Good
Strong
Source: Goldman Sachs Non-Food and Convenience Analysis (2005)
http://www.andidas.com/
43
Introduction
Clubcard
Tesco.com
Non-Food
Non-Food
Factors Driving Tesco’s Success in N-F: Apparel
I. Low prices
III. Ranges of
products
& promotions
II. Low costs
IV. Format
& convenience
http://www.andidas.com/
44
Introduction
Clubcard
Tesco.com
Non-Food
Non-Food
I. Pricing Strategy
Consistent Strategy: Tesco has extended its low
price positioning in core groceries across non-foods
lines to undercut competition. Low price / high
volume.
Price Key Competitive Advantage: Tesco is
between 40-60% cheaper than the industry average.
Market Research: low price factor highest correlation
in choosing Tesco.
Competition: Intense price competition with discount
retailers and closest rival, Asda: “George” brand
(launched 1990) based on successful concept of
“affordable fashion.”
http://www.andidas.com/
45
Introduction
Non-Food
Non-Food
Tesco.com
Clubcard
Average Pricing Competitiveness
Primark
Asda
Tesco
Matalan
H&M
%
Average
BHS
Arcadia
M&S
Next
Debenhams
Zara
-80
-60
-40
-20
0
20
http://www.andidas.com/
40
60
46
Introduction
Clubcard
Tesco.com
Non-Food
Non-Food
II. Purchasing: Costs and Logistics
Buying Power: bulk buying discounts; critical mass drives down costs.
Direct Sourcing: (65% UK clothing) eliminates intermediary agent mark-up:
captures greater percentage of gross margins.
International Purchasing: low cost factors of textile production (labour,
materials) in Asia (India, Sri Lanka, China, Indonesia).
Distribution: Initially utilized existing purchasing and distribution channels.
Subsequent development of efficient dedicated N-F infrastructure: warehouses,
logistics and specialized management systems.
http://www.andidas.com/
47
Introduction
Clubcard
Tesco.com
Non-Food
Non-Food
III. Product Range: Tesco’s Clothing Brands (1/2)
In Contrast to Asda’s
, Tesco has chosen a multi-brand
differentiated format to appeal to a wider range of consumers and niche
sub-markets, including:
More formal men
and women’s wear,
launched in 2000
Exclusive license
US casual wear
brand, launched in
2002
Own-label school
wear
Price-sensitive ownlabel basics
Other niche lines include: Sixteen-Twenty-Six (plus size), Greenbaby (infant),
children’s wear & branded sports apparel.
http://www.andidas.com/
48
Introduction
Clubcard
Tesco.com
Product Range & Promotion (2/2)
Most successful in niche categories of children’s wear
and value lines: standardized products in most price
sensitive categories.
Less successful in mainstream women and
menswear. Suffers from relatively negative fashion /
brand image status.
Tesco has attempted to incorporate fashionable
trends, employing well known designers and rival firm
management; emphasizing rapid product design and
production.
Heavy in-store merchandizing & external promotion
(inc TV advertising) to stimulate demand, build
awareness & create brand name equity.
http://www.andidas.com/
Non-Food
Non-Food
49
Introduction
Clubcard
Tesco.com
Presentation (Format)
Expansion: New stores / adding space
to existing locations. Trial of N-F only
stores (Homeplus). 40% of new N-F floor
space dedicated to apparel.
Convenience: High store footfall: “one
stop shop” for all grocery and other N-F
lines also attracts customers to apparel.
Consistent with current UK retailing
trends.
Synergy in Demand: Apparel has
become a key driver of customer traffic
in its own right, spillover effects on
demand for other product categories .
http://www.andidas.com/
Non-Food
Non-Food
50
Introduction
Clubcard
Tesco.com
Non-Food
Non-Food
Evaluation of Non-Food Strategy: Threats
Over-Diversification: management need to keep its “eye on the ball” and may
lose focus on its core grocery business, over-stretched resources.
Competition: anticipated entry and imitation by other supermarket retailers
(Sainsbury’s & Morrison's) will increase price deflation and reduce profit
margins. Price retaliation.
Cyclicality: Non-Food expansion increases likely cyclicality of demand and
exposure to economic downturns. However may be beneficial with value image.
Lack of Competencies: move in to unfamiliar products / markets may lack
resources, proprietary skills and required knowledge: overcome by partner
involvement.
Quality: may be sacrificed in pursuit of low costs.
http://www.andidas.com/
51
Introduction
Clubcard
Tesco.com
Non-Food
Non-Food
Why financial services?
Additional competitive advantage
Additional source of revenue
Meeting customers’ needs
Synergies with core business
Exploiting existing information about customers
http://www.andidas.com/
52
Introduction
Clubcard
Tesco.com
Non-Food
Non-Food
TESCO Personal Finance
ž
ž
ž
ž
Established in 1997
50-50 joint venture with the Royal Bank of Scotland
5 mln customer accounts in 2005
16 products, including credit cards, loans, saving
accounts, loans and mortgages
Ÿ In-store staff support and cash machines
Ÿ The most simple and mass market products. Easy and quick
access to products: online, in store or by phone
http://www.andidas.com/
53
Introduction
Non-Food
Non-Food
Tesco.com
Clubcard
TESCO Personal Finance
Pretax profit and growth
200
150
450%
350%
100
250%
50
150%
Y-O-Y Growth, %
pretax profit, mn GBP
550%
50%
0
-50%
-50
-150%
1998
1999
2000
2001
2002
2003
2004
Source: Company data
http://www.andidas.com/
54
Introduction
Clubcard
Tesco.com
Non-Food
Non-Food
Co-opetition
Customers
Complementors
Competitors
Suppliers
Brandenburger and Nalebuff, 1996
http://www.andidas.com/
55
Introduction
Clubcard
Tesco.com
Non-Food
Non-Food
Co-operate or Compete?
D>C>A>B
Compete
Co-operate
Compete
A, A
C, B
Co-operate
B, C
D, D
http://www.andidas.com/
56
Introduction
Clubcard
Tesco.com
Complementors: reasons for co-operation
ž Tesco
Ÿ Access to expertise and technology
Ÿ Risk management
ž Royal Bank of Scotland
Ÿ Access to an established consumer base
Ÿ New geographies
Ÿ Opportunity for future growth of other products
http://www.andidas.com/
Non-Food
Non-Food
57
Introduction
Clubcard
Tesco.com
Non-Food
Conclusion
Clubcard
Culture
TESCO.com
Non-Food
http://www.andidas.com/
58
Introduction
Clubcard
Tesco.com
http://www.andidas.com/
Non-Food
59
Introduction
Clubcard
Tesco.com
Non-Food
Back-up Slides
http://www.andidas.com/
60
Introduction
Clubcard
Tesco.com
Tesco.com
Non-Food
Touch Strategy
Ÿ Logged-on
¡ Offer of email and phone support, and £5 discount on first purchase
Ÿ Cautionary
¡ 5 days pp: email with link to online satisfaction survey
Ÿ Developing
¡ 2 week pp: Direct mail with tips on using the service.
Ÿ Established
¡ Generic monthly e-newsletter, encouraging cross selling
Ÿ Dedicated
¡ 2 months pp: £5 off for next shop
Ÿ Logged-Off
¡ Customer does not buy for an extended period: reactivation email, survey, and
£5 incentive
¡ Follow up incentive after first shop after a break
http://www.andidas.com/
61
Introduction
Non-Food
Non-Food
Tesco.com
Clubcard
TESCO Personal Finance
Number of customer accounts (millions)
5
4
3
2
1
0
1998
1999
2000
2001
2002
2003
2004
Source: Company data
http://www.andidas.com/
62
Introduction
Non-Food
Non-Food
Tesco.com
Clubcard
Increased size of ‘pie’
Total Household Deposits and Loans
Deposits/Loans, mn £
1000000
800000
600000
Deposits
400000
Loans
200000
0
Sep97
Sep98
Sep- Sep99
00
Sep01
Sep02
Sep03
Sep04
Sep05
Source: Bank of England.
•Outstanding household debt-income ratio 1.4 in 2004 vs. 1.05 in 1994
•8% average annual growth rate of personal deposits for the past 5
years
http://www.andidas.com/
63
Introduction
Clubcard
Non-Food
Tesco.com
Non-Food
TESCO as a competitor
Personal Loans
TESCO
Sainsbury
Natwest
Age limit
23
18
18
Amount, £
3000-25000
1000 - 25000
1000 - 25000
Minimum income
10 000
-
-
APR, %
6.3
6.1
7.4
Time period
1 - 10 years
1 - 8 years
1- 7 years
http://www.andidas.com/