Tesco - too little too late?

Along with a 6% fall in underlying profits for its financial year ending February 2014, £1.3bn of asset impairments and goodwill written down, and a 3% decline in same store sales for the fourth quarter (vs -1.3% for the full year), the UK's largest retailer Tesco today announced it will be stepping up investment not just in price but also in service. This includes specialised courses for staff working in meat and produce. 

Last year Tesco put hundreds of staff through special Silver and Gold fishmonger courses that covered fish sourcing, processing, preparation and cooking. This gave the people working on the counters greater confidence when talking to and advising customers, resulting in mid-single digit sales uplifts. I was fortunate enough to be invited by Tesco to attend one of the Gold courses down in Cornwall last year, and was able to see for myself what a positive impact it had on not just attendees' filleting skills, but perhaps even more importantly their motivation and feelings about their employer. The course was run by Tesco's fish specialist, who is also President of the National Federation of fishmongers and a really nice guy, assisted by his teenage son, a true fish geek (in the best sense of the word). I also got to meet Sam, who catches most of Tesco's sardines (one of the healthiest, local, most sustainable and cheapest fish varieties sold in the UK), as well as one of their main fish processors/suppliers. The relationship between Tesco and its fish suppliers seemed to be one of genuine collaboration and mutual respect - the opposite of stories of bullying and short-termism one sometimes hears about the way Tesco and large retailers treat their suppliers. 

While it's good to see Tesco investing more in training, it needs to go much further and faster, given the extent to which its market share is being squeezed by the German hard discounters, the trend away from large out-of-town stores towards convenience, as well as increasing sales cannibalisation and margin dilution from the online channel shift. It is also possible that pure online operators such as Ocado and Amazon Fresh will become significantly more profitable than brick and mortar operators as they scale up and technology improves, enabling them to undercut on price. Enabling and empowering staff to provide a new kind of in-store experience is surely the best defence against such threats. 

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