An interview in the McKinsey Quarterly with Tesco’s deputy chairman David Reid about the company’s dot-com and global strategies suggests that:
- Tesco.com has been successful and profitable because the company “spent two or three years perfecting the system. The key thing was that we developed a system based on our practical experience,” Reid said. The company didn’t spend a lot of money on new warehouses, chose a store-pick model, and focused on getting the process right, not on over-marketing and over-promising.
- Reid said, “Home shopping is now part of the Tesco toolkit that we can put into our businesses elsewhere. It's in Ireland, and it's being launched in South Korea, which has very high Internet penetration, and others will follow.”
- Reid also said that he expects that at some point, Tesco will probably test a warehouse-pick system, just to see if it can find new economies of scale that it can make work for the business.
- Reid stressed the growing importance of nonfood. “Currently nonfood, excluding gasoline, is in the low teens as a percentage of turnover,” Reid said. “In some stores, it can be as high as 25 or 30 percent. And in our hypermarkets in emerging markets, we are capable of selling up to 45 to 55 percent nonfood… we're trying to increase our nonfood business in the U.K. at twice the rate that the Tesco business as a whole is growing.”
- Tesco remains convinced that loyalty marketing is a legitimate approach to the business, Reid said. “If you took our loyalty cards away from us, it would be like flying blind.”
- Because international growth is expensive, Reid said that success is determined by being number one or number two in a market.
- KC's View: