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A cautionary tale from a retail giant

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We all know that the smallest of changes can make the biggest difference in business and that’s usually for the good, but not today. And definitely not if you’re Tesco. Small changes made over a few years have snowballed into a really big difference – think £6.4bn-worth of difference. Ouch.

A few years ago it would have been unthinkable that the retail giant could hold the title of ‘biggest losses in UK retail history’ but it’s happened. I only had to check ten times before it really sunk in. They used to reign supreme at the top of the shops and could do no wrong, but it’s fair to say that this year, Tesco has had a right royal annus horribilis.

It’s been almost impossible for them to have a good news story. Fallings out with major suppliers, dodgy accounting and closing stores – Tesco have been under the media microscope for a long time. The only positive from this morning is that their £6.4bn losses have taken their broken broadband service off the front pages.

So what went wrong?

Even the new CEO, Dave Lewis admits that they lost focus on their customers. I can’t decide whether the £250m accounting scandal shows more arrogance or idiocy – bullet-proof plan if I ever I didn’t see one – but it definitely highlights that the men in suits forgot the bigger picture. Yes chaps, there’s a world outside your office with actual customers in it. Treat them right and they’ll make your accounts look peachy without the need for further tinkering.

And I can’t help but think of Tesco’s tagline, ‘every little helps’. It feels out of touch, suggesting hard times and cutting back. Relevant a few years ago maybe, but we’ve moved on since then. Other supermarkets have wised up to the fact that the savvy consumers of 2015 have realised that they don’t need to cut back – just shop smart.

Aldi, the new darling of the retail world, tells its customers to ‘spend a little, live a lot’. Lidl have a campaign all about the ‘Lidl surprises’ you can find in its aisles – quality and value as standard. It’s pretty similar to Poundland’s philosophy, and they’re doing very well out of it, ta very much.

But there is some good news for Tesco today.

Despite 12 months of jaw-dropping under-performance, Kantar Worldpanel data shows that they’ve finally started to catch up with the industry in terms of sales growth. In the first 12 weeks of 2015, Tesco’s shares grew by 0.3%, while sales at Asda and Morrisons declined by 1.1% and 0.7% respectively.

How? They’ve started focusing on their customers again. CEO Lewis has put more staff into his stores, improved stock levels on shelves and lowered prices on key goods. Customers can find what they need, at a price they like and without standing in long queues to pay for the privilege. See Dave, ‘small change big difference’ can work in your favour.

It’s so simple – and dare I say so obvious – that I find it hard to believe it took them so long to figure it out. Put profits first and they’ll plummet. If you want to see increases in revenue you need to make customers, not profits, your number one priority – and to do that you need to understand your customers inside and out.

Isn’t that what I’ve been saying all along?

The Monachie Project helps businesses of all sizes understand what consumers really want from them. Get in touch to discuss how we can help you grow.

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