INDUSTRY OVERVIEW
Retail industry of UK is huge in size and contributes significant to the overall world GDP. Despite being huge retail section of UK is highly competitive and companies are constantly striving to provide improved product and services to their customers in order to gain greater market share. The retail industry has to combat the impact from the change drivers of segment itself as well as related segment. Moreover, other factors that have been posing impact include shift from brick retail section to clicks, change in lifestyle, demographics etc. (SAS, 2012).
There are many factors that have put impact on these sectors driving intensity in competition. Some of these factors are technological advancement that has driven e-commerce, financial crises, changing lifestyles and demographics etc. For instance, technological advancement has changed the spending pattern as follows:
(SAS, 2012)
Hence, retail industry worldwide and likewise in UK has changed to great extend asserting pressure on business for developing customer base with loyalty to derive consistent spending.
TESCO PLC
Tesco is a leading retailer in the UK followed by ASDA, Sainsbury and Morrison (Marketing Week, 2012). Tesco started trading in year 1924 followed growth with currently holding more than 3000 stores in UK alone with revenue of £42,248m in year 2011-12 (Tesco Plc, 2012a). Established as food retailer, Tesco has developed successful standing in non- food and online business as well (Marketing Week, 2012). Moreover, the food retailer has presence in 13 countries of Europe, Asia and US (image below):
(Tesco, 2012)
In order to remain leading store in national and international level, Tesco adopted clearly defined strategy that has seven components. These seven components includes: growing the core market of UK; continuing efforts to remain outstanding national and international player; developing expertise in other areas of service similar to one it has in food; growing retail services in all markets; prioritising responsibilities to communities as well as environment; creation of high value brand; and building team that has capacity to perform all of the above objectives successfully (Tesco Plc, 2012b).
Recently Tesco has announced the strategic options under consideration including sale or closure of its US loss making entity (BBC, 2012). To provide increased level of services to its customer under one title Tesco also initiated diversified services to Tesco mobile and Tesco Bank (Marketing Week, 2012).
CURRENT CHALLENGES IN RETAIL INDUSTRY
Retail sector being consumer driven industry faced direct hit from the economic turmoil. The challenge grew multi-facet with changing consumer trends requiring businesses to address them with greater urgency. Addressing these changing dynamics increased competitiveness of business environment; increased operational cost with efforts to retain customers and their loyalties are among biggest challenges that business are facing.
Large number of factors that has pressed the retail industry has been categorised in the research of PWC (2012) as key change drivers. Retailers that develop capacity to pace up their growth with discussed below change drivers are expected to remain competitive:
- Fast paced technological development- big data
- Demographic shift in consumer that consequently drives their spending pattern.
- Compounded impact from the worldwide consumers’ spending pattern this to increase the demand for retailers.
- Strongly developed supply chain.
- Developed awareness leading to knowledge driven shopping with more attracted towards the retailer providing more transparent information.
- Challenges faced by the various economic models of retailers worldwide.
Faced paced technological change that on one hand has increased options for customer to divert their spending from retail shops to internet based retailing and mobile purchases; has on other hand, provided business with extensive data usually referred to as big data about the consumer spending patterns as well as consumer details (PWC, 2012). Hence, transforming these challenges into opportunities business can and must concentrate on:
- Maximising loyalty: moving onwards along with customer-experience and store-related factor to relationship building with customer that fosters organic growth. Moreover, providing services to customers with multi-channel service with less operating cost; addressing the changing needs of changing demographics. Hence, integrated options that leave customer no option move apart for any service.
- Provide more personalised marketing: Integrated program provide more developed services to customer also enables business to facilitate more relationship based offering that is more customer centric than impulse based.
- Base on the developed data and information from consumer changing pattern shall transform their own retail model: based on the information from multi-channel offering and relationship based customer services enable business to transform to more finely developed segment; high target based facilitation of services and greater personalised offerings.
(Taylor, 2009)
TESCO RESPONSE TO CURRENT CHALLENGES
Tesco, in order to meet challenges prone to retailer has made several efforts to get big data in hand and provide more personalised services. Examples include; Tesco online services, Tesco mobile service, social media connection etc.
Tesco Club Card
One of the most important service include Tesco Club card (Humby, Hunt & Phillips, 2008). The club card offers customer to redeem points earned on purchases against products at all Tesco outlets. Moreover, Club card holders also receive quarterly statement detailing their points and respective transactions. Club card initiated from Malaysian Tesco has now been offered at worldwide Tesco outlets. Along with increased benefit to customer, club card provides Tesco opportunity to develop and upgrade their big data in order to provide more personalised services to customers; hence increasing loyalty.
The launch of the Tesco club card enabled the company to increase the overall sales and customer loyalty (Humby, Hunt, and Phillips, 2008). This step of the company allowed it to induce more market loyalty among the customers and in turn resulted in increasing market share and steady market growth. The Tesco club card is based on extensive market research, as the company researched for coming up with right design. The company was able to generate important customers’ insights with the help of this market research and found that loyalty card will not only allow the company to increase the sales but will also provide with opportunity to provide customers with more personalised solutions as with the help of the loyalty card the customer data is collected and saved in the database.
The Tesco loyalty club card is allowing the retail organisation to cope up with the current challenges in the retail industry and at the same time is according to the needs and demands of the customers. With the help of the loyalty program Tesco has been able to attract more customers and thus have increase the overall market share and brand image. The customers are rewarded for being loyal to the company.
The strategy of loyalty club card has been more effective because the competitors in the UK retail industry do not have enough penetration to come up with effective and efficient customer loyalty program (Zentes and Morschett, 2011). This in turn has allowed the retail organisation to take competitive advantage and in turn improve the brand image and increase the market share. This program has allowed the company to improve its relationship and connection with the customers. The customers are offered different facilities through the loyalty club cards coupons which can be used at different Tesco facilities, and thus more and more customers are being attracted and retained.
FURTHER DEVELOPMENT AND IMPROVEMENTS IN THE TESCO CLUB CARD
Tesco’s Club card is the most effective service that brings benefit to customer as well as business together in one cost. Brand conscious customers are mainly asserted of their importance to the Tesco with card based customer centric services. However, there is still much room for improvement to increase its effectiveness.
Club card can be further used as developing more integrated data. For instance, payment from club card points of internet purchases. Furthermore, increasing integration and upgrading the status of Tesco Club Card as the debit card. Customers can en-cash from points from Tesco bank. This would provide Tesco more information of the customer transactions, status and frequency. Increasing more alliances with other service provider (un-related products and service) to redeem Tesco points would increase relationship of Tesco card and customer. Facilitating payment of purchases on outlets other than Tesco can be made using Tesco club card points. This would generate for Tesco data of products and services that customer prefers from other outlets than Tesco and hence; developing an opportunity for Tesco to exploit new opportunity or improve its existing services. Finally, developing categories as pioneer card holders; students; household etc; giving option for credit purchase (up-to limit) upon reaching certain transaction limit would also assert the relationship of Tesco and Customer; hence increasing card effectiveness (Humby, Hunt, & Phillips, 2008).
CONCLUSION
Tesco being among the leader in retailer has been facing challenges and is making equipped efforts to meet the pace of change to maintain and enhance customer loyalty with Tesco. Among many efforts, Tesco has also launched customer loyalty cards that increases customer and Tesco relationship and also provide firm with the big data related to customers spending pattern to upgrade its service (Humby, Hunt, & Phillips, 2008). However, there is still more room for improvement and suggestions for the same has been accounted.
List of References
BBC. 2012. Tesco to review future of fresh and easy US chain. BBC News Business. Available at [Accessed 4 December 2012]
Humby, C., Hunt, T., & Phillips, T. 2008. Scoring Points How Tesco Continues to Win Customer Loyalty. London: Kogan Page
Marketing Week. 2012. Tesco. Available at [Accessed 3 December 2012]
PWC. 2012. Retailing 2020: wining in a polarized world. PricewaterhouseCoopers and Kantar Retail. Available at [Accessed 4 December 2012]
SAS. 2012. UK retail 2012 and beyond. Available at [Accessed 3 December 2012]
Taylor, J. 2009. Transforming retail marketing with analytics. Decision Management Solutions. Available at [Accessed 4 December 2012]
Tesco Plc. 2012a. Our business. Available at [Accessed 3 December 2012]
Tesco Plc. 2012b. Our strategy. Available at [Accessed 3 December 2012]
Tesco. 2012. Tesco at a glance. Available at [Accessed 4 December 2012]
Zentes, J., & Morschett, D. 2011. Strategic Retail Management: Text and International Cases. Wiesbaden: Betriebswirtschaftlicher Verlag Gabler.
