How Tesco beat Sainsbury - 2

3 Tesco Moves
3.1 Strategy

• Ignoring doubters, Tesco Management stuck with its belief that the company could reach both Bargain Hunters and Premium Shoppers.
  They felt: ‘It’s great to be in the middle, because that’s where the mass market is.’ They knew if they did a good job in the middle, they would win.
• In 1989, Tesco began gathering data from shoppers on what they wanted from a retailer. The most common responses were Lower Prices, Better Service, More Selection, and More Non-food Products.
• In the early 1990s, the company began to accelerate its construction of Superstores, bigger than its traditional Supermarkets, to allow for greater selection at lower prices.

3.2 Acquisition of William Low
In 1994, Tesco beat Sainsbury's in the race to buy supermarket chain William Low - giving it an important presence in the Scottish Market.
By 1995, Tesco had overtaken Sainsbury's as Britain's biggest food retailer. The William Low deal certainly helped.

3.3 Store & Service Improvements
3.3.1 Assortment Expansion & Diversification from Grocery

• It introduced New Economy-lines under the “Tesco Select” Private-Label. This gave shoppers the chance to save money on Basics.
• The group also pushed Non-food Sales, including Clothes and Home Entertainment.
  No items were out of bounds, it seemed. At one stage, it offered some of the cheapest PCs - with the added incentive of earning Clubcard points on a major purchase. It had even been selling Mopeds.
• Then, Tesco took on designer brands such as Levi's and Nike, offering their products at Cut prices. Even England and Scotland Football Shirts went cheap.
• It introduced house brands for value-conscious and more indulgent shoppers, and focused on customer service.
• To satisfy upper-end shoppers, it introduced Organic Food Products.
• The group also launched a wide range of house-brand goods differentiated by Price or Quality, first under the Value brand, and later under the Finest gourmet label.
• As supermarkets strode into the personal finance sector, Tesco was the first supermarket to offer Personal Pension Schemes, aimed at people unfamiliar with buying any financial products.
• Also in the 1990s, Tesco began to experiment with new products and channels. It moved into gasoline retail, placing convenience stores by the pumps. Through a joint venture with the Bank of Scotland, Tesco also started offering a wide range of financial products, including car and pet insurance.

3.3.2 Out-of-Town Superstores as well as High Street Presence

• It was the first UK retailer to realise that the future lay in giant “Out-of-Town Superstores” of 100,000 square feet or more. By the time Sainsburys and its other competitors woke up to what was happening, Tesco had grabbed most of the best sites.
• In fact, many of the sites were purchased by Tesco specifically to block competitors getting their hands on them, and they either remain undeveloped or were sold on with restrictive covenants preventing the new owners building shops on them.
• When out-of-town shopping trend, with higher fuel prices and increased traffic congestion, had almost certainly peaked, Tesco had anticipated this development. It had built up its Tesco Express and Metro Convenience Store Formats.
• Tesco realised the value of keeping a High Street Presence and as of 1999, it had 41 Metro stores in prime spots in the centre of Towns and Cities.
• It returned to the High Street by opening smaller Tesco “Metro” Stores. The idea was initially dismissed by Sainsbury's – which was then forced to play catch-up - with decidedly mixed results.
• For years, Sainsbury ignored the trend back towards convenience, but later caved in and decided to set up "Local" shops. They still had only two in 1999.

3.3.3 New Services

• Tesco proved adept at introducing a range of innovative new shopping services to entice customers like - Supermarket Bank Accounts.
• Tesco was first to react to customers' frustration at long Check-out Queues, initiating a "One-in-Front" policy - if there was more than one customer in front, they would open another check-out. The policy is still in place.
• And Tesco also removed sweets from Check-outs, pleasing parents bullied by their sweet-tooth children.
• 24-hour Shopping: By 1999, Tesco had more than 100 stores open round the clock. Sainsbury had 30.
• “If you ask an employee where something is, they will not only tell you; they’ll take you to the spot,” said the then Tesco Corporate Communications Manager Ian Hutchins.
• In 1996, it launched a dot-com delivery service. Unlike the fabulously funded, now departed grocery-delivery dot-coms — Webvan, Streamline, and HomeGrocer — Tesco.com has not only endured, but become profitable.
• It all gave shoppers the impression that Tesco chiefs had their interests at heart.

3.4 Marketing - Clubcard

• Tesco had the facility to listen more than Sainsbury, through the Clubcard. The idea was dismissed initially by Sainsbury who was then forced to play catch-up.
• {Lord Sainsbury famously dismissed the idea as nothing more than an "electronic version of Greenshield Stamps". He lived to regret that comment. Sainsbury's was forced to make an embarrassing U-turn and introduce its own loyalty card when the Clubcard became a roaring success.}
• They were 18 months behind in launching their own Reward Card, which had opened the door to a massive amount of Market Research for Tesco.
• Whilst loyalty had risen in recent years, Tesco's ability to attract new shoppers was been essential to its success. Just over two million more households chose to shop at Tesco over this nine year period. (TGI based on female housewives).

3.5 Price Management
Tesco had repeatedly captured more headlines by firing more shots in the Price Wars. The cuts would have cost it more than £1m in total (in 1999). Earlier then, it had announced it was reducing the price of more than 300 goods. To which, Sainsbury said it would "probably" match the cuts and boasted of having price guarantees on key lines.