Thursday 9 June 2011

Tesco is 'not too big'

Philip Clarke’s denial that the chain is too big raises several issues:

  • Presence in the High Street: ‘Appearing to be everywhere’ can be a negative in terms of implied limitations of choice. This can be avoided via clear and differentiated positioning, but especially by delivering quality and value far in excess of alternatives available.

  • Share of business: whilst Tesco average is 31% of food sold in the UK any incremental growth will be a continual problem in terms of having to manage negative PR. By emphasising that their expansion via non-food and ad the need to regard them as a mass merchandise retailer, their current 12.5% of ACV means there is lots of headroom as they grow this to 25%, after which it they are back to the current PR problem.

  • Real issue for suppliers is how big a share of your business they represent. Your risk profile (risk averse, risk neutral, risk seeking) will determine your level of comfort with anything in excess of 25% meaning that you model your business around Tesco, and make it fit other retailers…. If too big for comfort, the answer can be to grow your Tesco business as much as their potential allows, and at the same time try to improve the performance of other major customers using Tesco best practice and standards...

  • Then you really will be able to anticipate and even join them in their reaching for the moon…

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