Rather than a case of Tesco taking a risk in the search for incremental on-premise consumption, or even to increase store ‘temperature’ in and near the store, this move* should be seen as a way of creating space-synergies in relatively expensive retail real estate. In other words, if the most difficult strep in retailing is getting consumers into the store, it follows that a retailer should then attempt to sell anything that can be legally sold to shoppers.
This latest Tesco initiative will complement rather than replace existing in-store catering and only work if it succeeds in holding people longer in store, and the combination of food-service and retail sales produces incremental profits.
Dilution is not an option.
In practice, the space given to in-store consumption will have to be subjected to the same space productivity KPI of £1,000 sales/sq.ft./annum as the rest of the business, a move that will be watched carefully by those departments that have to sacrifice space to accommodate the new venture. Again, a net profit of at least 5.9% i.e. £59/sq.ft./annum will be a base requirement in order to avoid dilution of overall Tesco profitability.
The pursuit of these numbers (a first for HORECA?) will cause Tesco to examine and refine the on-premise consumption model. They will then search for cost savings and improved efficiencies from mouth-of-consumer all the way back to the green fields. This means better buying through to optimised service of consumption-needs within a store-café…with the added benefit of complementary sales for home consumption.
Experienced Tesco-watchers will know that Giraffe was not an impulse-purchase...
A lesson/warning for horeca owners everywhere?
For retail brands’ suppliers that also provide products in food services, it means harmonising the entire package of prices, terms and service levels, to the standard of their traditional Tesco business…minimum.
Moreover, the latest meat scandal will add ingredients-integrity to an already complicated package…
In terms of knock-on, these moves will add pressure to traditional food services suppliers that have never had to deal with the Big Four…and those in doubt should check out trade funding and deductions, for a glimpse of the New World…
Finally, for multiple restaurants and café players that feel they have little to fear from a grocer entering the battle-for-mouths, or who believe they could deal with this naïve 'competitor' by wringing its neck like a chicken, may we advise caution by paraphrasing the response of a similarly under-estimated player of the Forties: ‘Some neck, some chicken….’
On balance, it could be said that a neck is being stuck out, the only issue is whose….
This latest Tesco initiative will complement rather than replace existing in-store catering and only work if it succeeds in holding people longer in store, and the combination of food-service and retail sales produces incremental profits.
Dilution is not an option.
In practice, the space given to in-store consumption will have to be subjected to the same space productivity KPI of £1,000 sales/sq.ft./annum as the rest of the business, a move that will be watched carefully by those departments that have to sacrifice space to accommodate the new venture. Again, a net profit of at least 5.9% i.e. £59/sq.ft./annum will be a base requirement in order to avoid dilution of overall Tesco profitability.
The pursuit of these numbers (a first for HORECA?) will cause Tesco to examine and refine the on-premise consumption model. They will then search for cost savings and improved efficiencies from mouth-of-consumer all the way back to the green fields. This means better buying through to optimised service of consumption-needs within a store-café…with the added benefit of complementary sales for home consumption.
Experienced Tesco-watchers will know that Giraffe was not an impulse-purchase...
A lesson/warning for horeca owners everywhere?
For retail brands’ suppliers that also provide products in food services, it means harmonising the entire package of prices, terms and service levels, to the standard of their traditional Tesco business…minimum.
Moreover, the latest meat scandal will add ingredients-integrity to an already complicated package…
In terms of knock-on, these moves will add pressure to traditional food services suppliers that have never had to deal with the Big Four…and those in doubt should check out trade funding and deductions, for a glimpse of the New World…
Finally, for multiple restaurants and café players that feel they have little to fear from a grocer entering the battle-for-mouths, or who believe they could deal with this naïve 'competitor' by wringing its neck like a chicken, may we advise caution by paraphrasing the response of a similarly under-estimated player of the Forties: ‘Some neck, some chicken….’
On balance, it could be said that a neck is being stuck out, the only issue is whose….
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