retail news in context, analysis with attitude

The Wall Street Journal has a piece about what Tesco must do now that it has hired Unilever's president of personal care, Dave Lewis, to replace its current CEO, Philip Clarke, and suggests that "the company's preoccupation with being the biggest U.K. grocery retailer means it has failed to keep pace with changes in the market."

The problems, the story says, stem from the fact that Tesco's "big is best" approach no longer is relevant: "Tesco doesn't have a low enough cost base, though, to offer bargain prices like discount retailers such Aldi or Lidl. It also lacks the cachet among bigger spenders to rival chains such as Waitrose." And its "turnaround plan focused on doing everything marginally better for all shoppers, rather than acknowledging different customers increasingly want different shopping experiences."

With a new CEO, the Journal writes, "Tesco has an opportunity to rethink its strategy. One approach could be to divide its holdings into stores that target different types of customers. For example, it could target stores focused on value ranges, high-end products and a midmarket format … That would inevitably mean Tesco consciously getting even smaller. But the right cost base for each type of store could help improve trading profit margins."

But a key metric for Lewis's success will be whether he - as the first CEO in the company's history to be brought in from the outside - is willing to "break with the past."
KC's View:
To do what the Journal is suggesting, new management won't just have to re-engineer the company's infrastructure. It'll have to re-engineer the culture … and that will be very hard to do.