Published on: February 14, 2006• Published reports in the UK note that Tesco, which has announced that it will be coming to the US next year with a chain of convenience stores on the west coast, may encounter a small conflict of interest.
The problem is the Dunnhumby data analysis firm, in which Tesco owns a controlling interest – but which has been working with Kroger in the US to exploit that retailer’s database. At some level, it seems likely that Tesco and Kroger will end up competing with each other – if not on the west coast, soon afterwards.
Adding to the potential conflict is the fact that Tesco has named Tim Mason to lead its US charge…and Mason has been pivotal over the past decade in working with Dunnhumby in analyzing data generated by Tesco’s Clubcard program.
• In the UK, a columnist for the Observer, Frank Kane, notes that it was just a month ago that Tesco CEO Sir Terry Leahy was being loud and clear that he had no plans to enter the US market – while at the same time, Tesco had been running a “dummy store” inside a Santa Monica warehouse for about a year.
Kane writes that while it may not be a crime to mislead the press and the general public, “misleading the financial markets is another matter. I do not mean in the narrow, legalistic sense, which is a criminal offence under the Financial Services Act, and which I am certain is not the case here. But in the broader interpretation of sending out the wrong signals to investors, Tesco looks culpable. The markets are often spooked when a British company says it will take on Uncle Sam in his own backyard, and especially when retailers say it.”
He continues: “The flip-flop nature of the US decision has done nothing to reassure investors that it is the right one. The complaint from most analysts was that Leahy was very short on detail. Tesco has trialled its concept, they were told, but no detail was given of branding, trading figures or financials.” However, Kane writes, “the venture bears Leahy's personal hallmark, and he has been regarded as the best retailer in Britain for some years now, making Tesco into such a soaraway success that the competition is barely within sight.”
Kane writes that it well be that “Tesco has spotted the perfect slot and the strategy for exploiting it. The Californian consumer is still spending dollars prodigiously, and the 24-hour convenience store concept does appear to have been overlooked by the likes of Wal-Mart.” But the British markets are worried because, as he notes, “the corporate graveyards are littered with the tombs of British/US disasters.”
- KC's View:
- The one thing that we’re sure of is that Tesco has its ducks in a row and is ready to enter the west coast with a store that both breaks new ground and makes sense for the California consumer.
As for misleading the press…well, that goes with the territory. Public relations can be one of the dark arts (we say this having practiced that profession for a relatively short time for both CNN and The New Yorker, two entities that didn’t mind publicity).