Monday 23 March 2009

Tesco docking* the 'Long Tail'**?

Rumours that Tesco may be offering smaller suppliers the option of being delisted or re-routing via a third party sales agency, raises several questions:
- How will Tesco determine the cut-off point for 'small supplier'?
- How will this affect instore choice, especially in store-level assortment?
- Who will pay the agency fee?
- How many suppliers will decide to call it a 'Tesco-day' and divert their affections elsewhere i.e Leeds, where Asda is reported to be planning to request price & terms reductions from most suppliers on behalf of the shopper?

Most importantly, presuming Tesco have run the numbers, as the length of a long tail is determined by costs-of-servicing, cutting off the long tail for instore supply may make economic sense.
However, if the same supplier-list is applied to Tesco Online, with its far lower servicing costs, then Tesco could miss a significant online basket-size opportunity as smaller suppliers choose not to avail of the agency option…..

* 'Docking' refers to cutting off a puppy's tail, for reasons I know not...

** The long tail refers to Chris Anderson's discovery that the future does not lie in hits - the high-volume end of a traditional demand curve- but in what used to be regarded as the misses- the curve's endlessly long tail

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