BSTR472 - TESCO Digital

BSTR/472
IBS Center for Management Research
TESCO’s Digital transformation

This case was written by Nagendra Kumar M V, under the direction of D Satish, IBS Hyderabad. It
was compiled from published sources, and is intended to be used as a basis for class discussion
rather than to illustrate either effective or ineffective handling of a management situation.
 2015, IBS Center for Management Research. All rights reserved.
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License to use for IBS campuses only, Semester: III, Class of 2017-18
BSTR/472
TESCO‟s Digital transformation

―The future is a retail world where retailers will need to operate across multiple
channels while meeting wholly different customer expectations for service levels,
choice, convenience, and overall experience.‖
– Sir Richard Broadbent, Chairman, TESCO1
―The pace of the transition to online is rapid. This creates challenges for the
industry but we have a market-leading, profitable grocery home shopping
business.‖
– Philip Clarke, Chief Executive Officer, TESCO2
INTRODUCTION
Tesco Plc (Tesco) revealed interesting sales figures for the Christmas season 2013. Its online
business was picking up with customers who were using the web for their purchases. (Refer to
Exhibit-I for Online Sales Figures of Tesco) ―At Christmas it was 8% of food sales and 20% of
non-food sales‖ Philip Clarke (Clarke), CEO, Tesco 3 . For the year 2012-13, the total online
grocery sales of Tesco amounted to £2.5 billion, reporting a trading profit of £127 million4. The
management of Tesco also observed that the customers purchasing groceries online were spending
2.04 times more than those who bought groceries directly from the stores5. Also, the consumers
who shopped online purchased 2.98 times more general merchandise than consumers who
purchased directly from the stores6.
From the beginning of Tesco‘s operations, the management of Tesco was dynamic and competitive
in their approach. They redefined themselves to suit with the changing business situations and
market conditions. Whenever Tesco suffered a setback, they emerged stronger by working with a
definite objective and focus. They implemented innovative ideas and dynamic policies to stay
ahead of the competition. The management was quick to experiment with contemporary ideas to
serve customers better. In the year 2010-11, when the company was facing stiff competition, the
scope of Tesco was redined under the leadership of Philip Clarke (Clarke) and came up with a new
plan called “Build a Better Tesco”. The plan was aimed at improving and expanding Tesco‘s
business performance by leveraging on technology to improve customer experience.
With the constantly changing technology and growing demands of different customers, Tesco also
concentrated on being a strong multi-channel retailer as the company realized that there would be
greater scope to improve its business prospects if it provided an enhanced multichannel experience
to the customer. Addressing an investors‘ conference in February 2014, Clarke reiterated the need
1
TESCO Annual Report, www.tesco.com, 2013-14.
2
TESCO Annual Report, www.tesco.com, 2013-14.
3
Stuart Lauchlan, Every little helps towards Tesco‘s multi-channel future, http://diginomica.com, March 4,
2014.
4
Ibid.
5
Ibid.
6
Ibid.
1
to make Tesco a strong multichannel retailer by revamping the existing stores 7 , setting up
convenience stores8, and enhancing the digital experience9. Tesco also saw a great challenge as
well as opportunity in leveraging the growing use of mobile technology among its customers. It
was observed that around 43% of Tesco shoppers were using mobile phones to search for and
compare products while they were shopping in the stores10.
BACKGROUND
Jack Cohen (Cohen) left his job at Royal Flying Corporation11 and started his own business in the
year 1919. He sold groceries from a store at East End12 in London. On day 1, the sales were £4 and
the profit was £1 13 . In the year 1923, Cohen partnered with a tea merchant, Thomas Edward
Stockwell (TES), to sell their first own branded product called Tesco tea (The name Tesco was
derived from the first letters of the tea merchant‘s name and from the first two letters of Jack‘s
surname Cohen). Following this, Cohen opened an independent grocery store at Burnt Oak,
Edgware, North London14, in the year 1929 and named it TESCO stores.
Cohen operated his business as a Private Limited Company and converted it into a Public Limited
Company in the year 1947 by listing its stock on the London Stock Exchange at a share price of 25
pence15. Cohen expanded his business through acquisitions and by adding new stores. During the
1950s and 1960s, he acquired a large number of retail and grocery stores in the UK. Tesco‘s stores
were large and offered huge quantities of products. Its store at Leicester16 entered the Guinness
book of records for being the largest store in terms of quantity of products and size of the store.
Cohen introduced the concept of Supermarkets17 and Superstores18 in the UK. He also introduced
the concept of self-service stores. In 1958, Tesco started to sell non-grocery items like electronics
and clothing.
In the year 1963, Cohen introduced Green Shield Stamps (GSS). GSS was a kind of Trading
stamp19 introduced by the Green Shield Trading Stamp Company (GSTSC)20. Tesco associated
with GSTSC and introduced GSS through its check-out points. Customers were given stamps
based on their purchases and they collected these and stuck them in a book. Once the book was
filled up, they exchanged it for a gift offered by Tesco and GSTSC. This strategy mainly served as
a loyalty scheme and was also helpful in improving Tesco‘s sales and enhancing its reputation in
the market.
7
Tesco operates different forms of stores which are different in size and operation.
8
They represent a form of physical stores that help consumers to shop convieniently with the help of
technology.
9
It represents to enhancing the shopping experience by using latest digital technology.
10
Stuart Lauchlan, ―Every little helps towards Tesco‘s multi-channel future,‖ http://diginomica.com, March
4, 2014.
11
A wing of the British army during the World War I, the corporation provided artillery support and
monitoring of the activities of enemies operating beyond the boundaries.
12
It is the name of a street in London, United Kingdom.
13
Tesco Assesses the Organization‘s Operational Industry Environment Marketing Essay,
www.ukessays.com, accessed on May, 2014.
14
It is the name of a street in London, United Kingdom.
15
About Us (History), www.tescoplc.com.
16
It is a city in England, United Kingdom.
17
They are a form of retail stores that offer groceries and non-food items like electronics and clothing, etc.
They are basically meant for self-service.
18
They are a form of retail stores capable of storing and selling large volumes of groceries and non-food
items like electronics and clothing, etc. They are larger in size than Supermarkets.
19
Coupons given to the customers as a part of customer loyalty programs.
20
A company operating loyalty schemes through trading stamps. It was founded in the year 1958 in United
Kingdom.
2
In 1972, Tesco opened petrol stations across major areas in the UK. Until the year 1975, the
retailer under Cohen‘s leadership, followed a strategy called “Pile it high, sell it cheap”. Under
this strategy, Tesco purchased large quantities of stocks and sold them at low prices. Till 1975,
Tesco reaped the benefits of this strategy. However, changing times and market conditions
impacted the strategy after that, and hurt its business performance. During the same time, there
was a change in the top management. Leslie Porter (Porter) took over from Cohen as the Chairman
in the year 1974. He formed a team and started to analyze the business situation and market
conditions. Porter and his team realized that competitor aggressive pricing strategies, prevailing
economic conditions, and loss of consumers‘ interest in Tesco products had an impact on the
retailer‘s performance. Porter and his team immediately decided to drop the GSS scheme and to
introduce direct discount schemes21. This move was aimed at countering the discount packages
offered by competitors and overcoming the prevailing inflationary conditions.
A series of discount schemes was introduced in the period 1977 to 1982. In the year 1977,
Operation Checkout was launched and in the year 1982, Checkout82 was launched. Under these
schemes, the discounts ranged between 3% and 26% on various goods22. However, as a result of
offering the discount schemes, Tesco witnessed a decline in the profit margins. In order to improve
its market position and profit margins, the management decided to focus on improving sales
volumes. To the surprise of analysts and market participants, Tesco improved its sales volume by
more than two-fifths of the sales originally forecast during 1980s, and achieved a turnaround23.
Ian MacLaurin (MacLaurin), a key member of Porter‘s team succeeded Porter as Chairman in
1985. MacLaurin had worked as Managing Director of Tesco during Porter‘s chairmanship. The
two had a successful tenure together for 10 years. After assuming charge, MacLaurin focused on
improving consumer confidence. He decided to close down unprofitable and poorly managed
stores besides revamping the existing ones and to provide better quality products. Tesco‘s
management redefined their strategy and called it “Every little helps”. The objective of this
strategy was to focus on every possible way to improve business performance and customer
satisfaction. As a part of the strategy, Tesco expanded its operations into international markets,
ventured into online business, improved the quality of its customer services, introduced different
products, and diversified into new businesses. The introduction of the Club card 24 was a
revolutionary step taken by the Tesco management during this phase; it transformed Tesco‘s entire
business model and helped to improve sales.
CLUB CARD
The introduction of Club card was a milestone in Tesco‘s journey. It was born out of the initiative
taken by Terry Leahy (Leahy), Marketing Director of Tesco (1992-1997). He and his team
members while looking for innovative ways and ideas to improve the performance of the business;
came across Dunhummby, a Data Analytics company specializing in analyzing consumer data.
Dunhummby was given the responsibility of designing a model that met Tesco‘s requirements.
Dunhummby came up with the Club card. After a series of trials which ran for almost a year, the
Club card was introduced nationwide in the year 1995.
The operation of the Club card was simple. Customers, who were interested in becoming members
of the scheme, approached the nearest Tesco store, filled and submitted the membership form
there. The customers were asked to fill in the contact information, details of household activities,
hobbies and interests, etc. The card holders were then allowed to use the card at Tesco stores,
21
The schemes under which the products are offered at reduced prices.
22
About Us (History), www.tescoplc.com.
23
Sir Leslie Porter, Shrewd and uncompromising chairman of Tesco, www.independent.co.uk, March 25,
2005.
24
A Card served as a means of introducing customer loyalty schemes through Digital mode.
3
petrol stations, food courts, and online. For every purchase of £1, the consumer gained a point in
stores and a point for every purchase of £2 on Tesco fuel. The points were accumulated and after
reaching at a certain level (For example, after reaching 150 points), the points were converted into
vouchers and gift coupons25. Whenever, a customer used a Club card on special offers, the points
were doubled. Four times a year, Club card members got vouchers equivalent to the value of the
points accumulated.
A unique feature of the Club card was its ability to capture the purchase data of the consumers.
The executives of Dunhummby used their expertise to analyze the information generated through
the Club card. Based on the information, consumers were divided into different categories. The
categorization was largely based on the needs and preferences of the consumers. Dunhummby
used software called “Zodiak” which helped to build the socio-economic profiles of consumers.
Tesco further utilized the information to decide on the offers that it would introduce in various
individual stores and to make strategic decisions. The Club Card helped Tesco understand the
customer buying behavior. MacLaurin, said ―What scares me about this is that you know more
about my customers after three months than I know after 30 years‖26.
Initially, the launch of the Club card was criticized by Tesco‘s competitors. "It will cost at least
£10 million just to administer. That's wasted money that brings no benefits at all to customers. We
have no plans to go down that route." said David Sainsbury, Chairman, Sainsbury Retail Chain27.
But the Club card became an instant success and yielded quick results. It, in fact, became an
industry benchmark. Tesco‘s competitors started to replicate the concept with minor modifications.
Since 1995, Tesco entered new market segments, offered products like mobile phones, financial
services, clothing and home electronics, etc. It became a leading retailer in the UK, both online and
off-line, surpassing its long-standing competitor Sainsbury.
ONLINE EXPANSION
Tesco started offering products online in 1990. In the beginning, customers could place orders
through the telephone, fax or the internet. The order processing mechanism was manual. It was
slow, ineffective, and often resulted in the failure of the system. Gradually improvements were
made in the service. Tesco‘s website „tesco.com‟ started offering a wide range of products and
services from the year 2000. The website grew to be popular and attracted a large number of
customers.
The management of Tesco was keen on developing a customer-centric website which was simple
to navigate. ―Actually, we weren’t particularly bothered about the Website, as long as it enabled
customers to do the basics of a shopping trip; that is, find the products they need, look at them,
make their choice, and pay. So, we decided to keep it as straight forward as possible‖ Laura
Wade-Gery, CEO Tesco.com28. The website created an impression in the minds of the customers
that Tesco provided whatever a customer wanted at a great value (In terms of satisfaction)
To ensure customer customization choices like Express shopper, Lunchbox Tool, My Favourites,
Online Recipe Book, Organic Box and Season‘s choices were created. Alternative option was also
provided to recommend a product if Tesco did not have stock of a certain product. The customer
received a right to reject the alternate product if the customer was not interested. He/she could
return it back to the delivery boy and the money would be refunded.
25
Justin Schamotta, Clubcard vs Nectar: the ultimate guide, www.choose.net, March 22, 2013.
26
Rebecca Marston, Tesco‘s triumphs under Sir Terry, http://www.bbc.com/, June 8, 2010.
27
Chris Sheedy, Forget Big Brother – Big Data is Changing our world, http://www.itbdigital.com/,
September 4, 2013.
28
Albrecht Enders and Tawfik Jelassi, Leveraging Multichannel Retailing: The Experience of Tesco.com,
www.researchgate.net, June 2009.
4
Tesco‘s online business offered the full range of products which were available in the stores.
Uniformity was maintained in terms of prices, offers, quality, and flexibility between online and
offline shopping. Besides, tesco.com stores the purchase information of the customers facilitating
them to retrieve the data easily whenever they shopped online.
Tesco followed a unique delivery model for delivering the products ordered online. Instead of
operating separate warehouses for processing the orders, Tesco processed the orders through its
existing stores. ―If you place an order on Tesco.com, we will go and pick that order in a Tesco
store. So our experience of availability, product quality, and other aspects of shopping at the store
is the same as that for somebody walking in from the street. In essence, Tesco.com pickers are our
eyes of the regular customer on the shop floor, to the extent that the Tesco.com metric for
availability has become the overall Tesco metric for availability.‖ said Daniel Roberts, Operations
Development Director Tesco29.
It was a challenging task to process these online orders without causing inconvenience to the
offline shopping customers during peak hours. Around 2,50,000 orders were processed across 300
stores in a week. To overcome this challenge, Tesco modified pick up timings for online delivery.
The picking staff was allowed to pick up the products only between 6.00 am to 2.00 pm, without
creating problems during peak hours. Also to improve the customer satisfaction and engagement of
its offline customer, Tesco invested heavily on latest Digital technology.
GOING DIGITAL
Tesco constantly improved operational performance and the customers‘ shopping experience both
offline and online. It provided an extensive in-store digital experience for the consumers. Scan as
you shop was an innovative way of shopping introduced by Tesco in the year 2008 for its Club
card members. Around 20,000 hand-held devices (Refer to Exhibit-II for the Functioning of
Handheld Device) were provided in the stores to facilitate the process of Scan as you shop. Using
these handheld devices, a consumer scanned the barcode on whatever products he/she wanted to
buy and placed the goods in bags. This helped in preventing a final rush for billing. The device
updated the shopping information of the customer and made it easy for him/her to pay the bill
amount at the designated counter without much delay. At the counter, a system was installed that
allowed the customer to scan the details of the shopping uploaded in the handheld device. During
the entire process, customer services executives were available at various levels to assist the
customers. This concept had a significant impact on the customers, who were enthusiastic about
the service. ―Customer feedback is extremely positive, with the main benefits quoted as being
convenience, time saved, ability to track spend, and not having to queue at the checkouts‖ said a
Tesco spokeswoman30. The Scan as you shop facility was available only to registered Club card
members.
Tesco stores were also equipped with Broccoli Cams and Smart Badges. The Broccoli Cam
placed in front of the trays scanned them and alerted the staff when they became empty. This
helped the staff to refill empty trays immediately without much delay. Using Smart Badges, the
staff updated customers on necessary product information. The Smart Badges gave information on
prices, availability, location in stores, and about various offers and new arrivals. Both the devices
(Broccoli Cam and Smart Badges) helped the staff to avoid having to check up unnecessarily or
to search through the stores during busy shopping hours.
The stores were also equipped with Electronic Shelf edge labels. These labels displayed the price
of the product and were stuck on the shelves below the products. They helped the staff to update
price information without much effort ―Every week at Tesco we change between five and 10
29
Albrecht Enders and Tawfik Jelassi, Leveraging Multichannel Retailing: The Experience of Tesco.com,
30
Ian Quinn, Scan-as-you-shop technology set to roll out across Tesco, www.thegrocer.co.uk, September
29, 2012.
5
million labels and that’s an awful lot of labels. The future is electronic shelf edge labels that we
have developed using the same technology as the Amazon Kindle.‖ said McNamara, CIO, Tesco31.
The Bar Codes and QR codes available on the products helped customers have a better shopping
experience. During the Scan as you shop process and direct shopping, customer‘s utilized hand-
held devices and mobile phones to scan the bar codes on the products. The QR codes helped
customers to find out details about the products by scanning the codes using mobile phones.
Click and Collect Kiosks, Mobile apps, and other online applications further enhanced the
shopping experience of customers and store management. Click and Collect Kiosks were installed at
key locations in the stores. Using these Kiosks, the customers could have a quick shopping
experience without moving across the entire stores. Once shopping was completed and payment
made, customers could collect the products at the checkout points. Using the mobile apps and online
applications, customers searched for the details of the products that were available across the stores.
Tesco introduced a mobile app featuring a technology called Augmented Reality, which facilitated
the viewing of the alignment of different products in the stores by both customers and the company
executives. Besides implementing various digital technologies, Tesco offered mobile phones and
tablets pre-installed with Tesco apps. It associated with branded mobile companies to offer mobile
phones through its stores and introduced its own brand of tablet called the Hudl.
TESCO ON SOCIAL MEDIA
Tesco managed a Facebook 32 account for interacting with its customers. Tesco‘s social media
team posted regular updates on their Facebook page. The posts were mainly related to promoting
its brand and the products. To encourage better customer interaction, Tesco awarded Club card
points to customers who shared information and feedback on various topics and issues. It followed
a set of social media guidelines to protect the interests of the customers and social media users.
The social media team was advised to protect the values of the customers and the company, stick
to authentic information, protect copyright issues in terms of content postings, etc. Tesco‘s
Facebook page was provided with a number of apps and games. Any user (or) customer who
wanted to play a game (or) utilize the app had to agree to like the page first.
An app called „real food‟ gave information on seasonal recipes offered by Tesco. A separate Tab
called „Here to help‟ was available on the Facebook page, providing information on various
customer care channels. A separate page was opened to promote Tesco‘s Florence & Fred (F&F)33
segment. This page was updated regularly with brand information. An app called „Virtual Fitting
Room‟ was available on the F&F page allowing customers and users to view their 3-dimensional
(3D) images by uploading their body measurements through the app. Once a 3D image was
created, customers could try out various outfits in different sizes through the 3D image.
Tesco operated around 16 Twitter34 accounts with respect to different business units and product
categories. The most popular Twitter accounts related to customer service, offers, and the Club
card. The customer service and offers category had around 49,000 and 48,000 followers
respectively35. Having managed different accounts, Tesco‘s social media team successfully spread
brand messages and offers. Through the ‗offers account‘ on Twitter, the latest product discounts
31
Alex Lawson, Tesco trials electronic shelf pricing, www.retail-week.com, April 16, 2012.
32
It is a social networking site facilitating the registered users to share their views and opinions in the form
of posting text messages, photographs, Video and audio clipplings, etc. It serves as a common platform
and helps to form communities. Besides it serves as a marketing platfom for the businesses.
33
It is a brand name of the clothing segment of Tesco.
34
It is a social networking site that helps registered users post short messages called tweets. It serves as a
common platform for the users to share their views and opinions. The users can also respond to the tweets
posted by the other users.
35
David Moth, How Tesco uses Facebook, Twitter, Pinterest and Google+, https://econsultancy.com,
January 24, 2013.
6
and offers were updated regularly. The team was very active in responding to customer queries
each and every hour. There was continous interaction between the users and executives through
the Twitter account. Besides Facebook and Twitter, Tesco‘s presence was also felt on Pinterest36
and Google+37. On Pinterest, Tesco posted pictures promoting its products. In order to improve
the number of followers on Pinterest, Tesco utilized third party content38 on the website. On
Google+, Tesco posted content similar to that available on its Facebook page. The retailer did not
have a considerable presence on Google+ and Pinterest and was in the process of making efforts to
improve its presence on both these social networking sites.
While interacting with customers through social media, most companies failed to give clear
information on customer care contact timings, etc., to customers. Tesco, on the other hand,
managed Facebook‘s timeline and the tweets on Twitter were aimed at meeting the expectations of
the customers. The social media team regularly updated the customers as to when and how to
contact the customer care executives. Besides, the team tried to solve customer problems directly
online. Another aspect of Tesco‘s online customer service was to maintain the focus on the issues
highlighted. On whatever platform (Facebook or Twitter) a query was posted and in whatever
mode (directly through social media platform or by using Facebook private messages) it was
requested, the customer care team tried to solve the issue amicably whether it was sensitive (or)
non-sensitive. The customer care team brought on to the open platform such sensitive issues and
tried to solve them in a friendly manner (Refer to Exhibit-III for a Snapshot of Issues Solved
through Twitter).
Tesco deputed knowledgeable customer care executives to solve the problems and issues of the
customers at first sight. All the customer care executives were knowledgeable about the company‘s
products, deals, and services across various stores. This helped them to solve the problems
immediately after queries were received. Tesco provided specific support, rather than offering
generic support, addressing issues related to specific individual stores through its Twitter account.
Tesco received “The Most Effective Use of Social Media” title awarded by Customer Contact
Association (CCA)39 for the two consecutive years of 2012 and 2013. The retailer‘s services were
highly commended for the way its customer service executives interacted with the customers. The
social media team used a unique conversational tone in addressing customers‘ problems and
queries. They interacted in a pleasant and respectable way.
INTEGRATION IN MULTICHANNEL STRATEGY
Tesco provided its customers with various options to access online shopping. They could log on to
the website directly or access it through mobile phones and tablets. Once an order was placed, the
products were delivered as per the mode of delivery selected by the customer. The products were
directly delivered to the home (or) the customers were allowed to collect them from a nearby
Tesco store (or) from a designated collection points. Tesco associated with Microsoft to develop
an App called Tesco Access. This app facilitated access to Tesco stores online via wireless and
mobile devices.
Club card played crucial role in integrating online transaction and offline transactions. Once the
customer was registered for online shopping using Club card, the details of his/her previous offline
transactions got updated. Integration of Club card details with online transactions enabled Tesco to
36
A social networking website facilitates photo sharing among the registered users.
37
A social networking website facilitates interaction between the registered users through text messages
and video interactions.
38
Information and data collected from external sources.
39
A leading organization conducting analysis and research on customer care programs and operations. The
Most Effective Use of Social Media award is given to companies for achieving success in social customer
services and for engaging customers and employees in achieving organizational objectives by adopting
and implementing innovative ways.
7
enhance customer satisfaction by promoting products for the customers based on his previous
purchase history. Tesco successfully addressed channel conflicts arising out of online and offline
integration by aligning incentives between offline and online modes. The managers in the stores
benefited from online sales just the way they benefited from increased sales in their physical
stores. This was especially important, since the average online purchase value was up to four times
higher than the average store-based purchase value. Tesco also paid careful attention when
allocating costs between the two channels. The integration and operation of online activities
incurred additional costs. The costs were also apportioned rationally.
With growing number of orders, Tesco faced setbacks in delivering the products and managing its
store. In order to overcome the difficulty, Tesco created hubs through larger stores called as
―Tesco Extra‖. They were larger in size and helped Tesco to increase picking staff, delivery fleet
and introduced customized order handling process. In the year 2006, Tesco came up with its first
‗dot.com only‘ store for executing online transactions. The experience of Tesco in handling
logistics and store handling methods helped for the success of the stores. The stores were
introduced with a special trolleys equipped with computers facilitated picking staff to pick
products quickly and easily by providing necessary guidance (Refer to Exhibit – IV for Tesco’s
Evolving Strategy to Address Online Demand).
Tesco stores made it easy for consumers to compare prices of the product in store and online.
Further, the customer could utilize Wi-Fi for product reviews; sharing product images to seek
buying advice from friends on Facebook and Twitter. Tesco also created interactive grocery stores
in airports and subway stations. Tesco‘s IT staffers continued to optimize the customer experience
across every channel the retailer supported, including online-physical channels such as the Click
and Collect service that was extended to cover groceries and clothes as well as general
merchandise. The management was determined to leverage upon both digital and physical retailing
(Refer to Exhibit-V for Components of Tesco’s Multichannel Strategy).
ROAD AHEAD
Tesco began adopting a holistic approach to its multichannel offering and looking at how
customers were interacting through its online, digital, and in-store points of contact. The
management realized that any future success would depend upon the successful integration of both
offline and online points of contact. ―If you reinvent you’ve got more of a chance of growth in
future. Bricks and clicks will power growth in long term and medium terms‖ said Clarke40. The
relevance and importance given to digital transformation by Tesco could be seen with the
formation of an executive committee on Digital marketing. (Refer to Exhibit-VI for Organization
structure of Tesco).
Though Tesco went through a successful digital transformation over the years, some critics felt
that the retailer should be more aggressive in exploiting the opportunity in the digital space and
engage with its customers (Refer to Exhibit – VII for Digital Transformation Model). Despite
being the supermarket with the most number of fans on Facebook, it was the second least engaging
one on social media with only 0.98 % engagement — up to 7 times less than its smaller rivals Aldi
and Asda. According to BirdSong41 founder Jamie Riddell ―Tesco actually has more Facebook
fans than any other UK supermarket, but it is squandering its opportunity — the group has
proportionally fewer fans talking about it than any brand besides Co-op. Asda has a similar
number of Facebook fans, but manages to engage far more of them‖42
40
Ben Bold, a Five-step guide to Tesco CEO Philip Clarke‘s brand revival strategy,
www.marketingmagazine.co.uk, February 26, 2014.
41
It is a social media analytics tool for quantitative and competitive analysis of various business brands on
Social media platforms likes Facebook and Twitter.
42
Tesco is ―squandering its opportunity‖ by lacking social engagement, BirdSong founder states on back of
poor results‖, www.thedrum.com, accessed on July, 2014.
8
Exhibit-I
Online Sales Figures of Tesco Plc
(December, 2012 and December, 2013)
Category Percentage Change

Online Grocery 10% (Increase)
Online General Merchandise 25% (Increase)
Online Clothing 70% (Increase)
Digital Entertainment 245% (Increase)
Source: http://diginomica.com, March 4, 2014.
Exhibit-II
Functioning of a Handheld Device
How your handset works
Scanning made simple

Source: http://www.tesco.com/scan-as-you-shop/
9
Exhibit-III
Snapshot of an Issue Solved through Twitter
Source: http://www.conversocial.com/
Exhibit – IV
Tesco‟s Evolving Strategy to Address Online Demand
Tesco Stores Tesco Extra Stores Tesco Dotcom only Stores

Source: Compiled by Author
10
Exhibit- V
Components of Tesco‟s Multichannel Strategy
Source: Digital Entertainment 2.0:Telcos Risk Missing the Ultraviolet Online Video Oppourtunity,
www.telco2research.com/, accessed during July 2014.
Exhibit-VI
Organization Structure of Tesco
Source: Adapted from Tesco Annual Report 2011-12.
11
Exhibit - VII
Digital Transformation Model
Digital Retailer Stage II

 Collaborative Consumption
 Co-creation
Transformation Enablers
 Private labels
Working on Customized Products
 Social Networking + Digital
Technology
Enabling Customers & Retailer to
Collaborate
Digital Retailer Stage I

 Ease
 Convinience
 Customization
 Customer Engagement
Transformation Enablers
 IT Infrastructure & Mobile
Technology
To Connect and Offer Services
 Digital Devices
To empower the customers and to
keep him/her in comfort
 Analytics Partner
Customer Profiling
 Logistics Partner
Ontime Delivery
 Social Network
Social Engagement
 Customer Service Team
Respond Realtime
Traditional Retailers
Source: Prepared by Author.
12
Suggested References and Readings
1. Tesco is ―squandering its opportunity‖ by lacking social engagement, BirdSong founder states on back of
poor results‖, www.thedrum.com, accessed on July, 2014.
2. Tesco – Business Transformation Case Study, www.champs2.info, accessed during June, 2014.
3. Tesco Every little helps (Case study), www.businesscasestudies.co.uk, accessed during June, 2014.
4. How does Tesco use Social Media?, http://giraffesocialmedia.co.uk, accessed on June, 2014.
5. Tesco expected to launch digital services ―imminently‖, www.computerweekly.com, accessed during
June, 2014.
6. Tesco sales decline, but multi-channel efforts are paying off, www.computerweekly.com, accessed during
June, 2014.
7. Tesco (Case study), http://cws.cengage.co.uk, accessed duing June, 2014.
8. Green Shield Stamps, www.retrowow.co.uk, accessed on June, 2014.
9. Tesco achieves global leadership in using social media to help customers, www.cca-global.com, June 05,
2014.
10. Tesco Assesses the Organization‘s Operational Industry Environment Marketing Essay,
www.ukessays.com, accessed on May, 2014.
11. Grzegorz Pawlowski, Tesco gears up for an online sales boost, http://evigo.com, April 22, 2014.
12. Rebecca Thomson, Philip Clarke-Tesco must take the lead in reshaping retail, www.retail-week.com,
March 12, 2014.
13. Ian Jindal, How effective is your multi-channel strategy?, http://realbusiness.co.uk, March 4, 2014.
14. Stuart Lauchlan, Every little helps towards Tesco‘s multi-channel future, http://diginomica.com, March 4,
2014.
15. Kyle Nazario, Augmented reality set to boost shopping experience for Tesco customers, www.itpro.co.uk,
February 28, 2014.
16. Chloe Rigby, Tesco explains how it will put customers first as it looks to win in the multichannel era,
http://internetretailing.net/, February 28, 2014.
17. Ben Bold, a Five-step guide to Tesco CEO Philip Clarke‘s brand revival strategy,
www.marketingmagazine.co.uk, February 26, 2014.
18. Katy Askew, Tesco looks to join the dots with multichannel strategy, www.just-food.com, February 26,
2014.
19. Nils Pratley, Tesco has a plan for the new era of retail, but it‘s a complicated one, www.theguardian.com,
February 25, 2014.
20. Charlie, Internet Leaders Dinners with F&F Clothing Tesco, www.mixingdigital.co.uk, November 28,
2013.
21. Rachel Tran, Tesco Awarded CCA‘s Most Effective Use of Social Media Award 2013,
www.conversocial.com, November 27, 2013.
22. Glynn Davis, Tesco‘s online grocery journey, www.retailinsider.com, November 25, 2013.
23. David Moth, How Tesco, De Beers and others use digital to enchance the in-store experience,
http://econsultancy.com, November 4, 2013.
24. John Foley, Tesco Revolutionizes Retail and Gears up for ―Battleground of the Future‖, www.forbes.com,
October 21, 2013.
25. Louise McBride, Tesco delivers shopping to one of the retail giant‘s online customers,
www.independent.ie, October 20, 2013.
26. Rebecca Thomson and Jennifer Creevy, Tesco and Sainsbury‘s quests for success, www.retail-week.com,
October 11, 2013.
27. Jennifer Creevy, Tesco boss Philip Clarke: ‗2014 will be the year of hypermarket revamps,
www.racplus.com, October 10, 2013.
28. David Benady, Tesco kick-starts digital attack with Hudl launch, www.campaignlive.co.uk, October 03,
2013.
29. Rebecca Thomson, How is Tesco‘s multichannel strategy developing?, www.retail-week.com, October 2,
2013.
13
30. Denise Winterman, Tesco: How one supermarket came to dominate, www.bbc.co.uk, September 9, 2013.
31. Chris Sheedy, Forget Big Brother – Big Data is Changing our world, www.itbdigital.com, September 4,
2013.
32. Tom Faree, Tesco‘s Retail Bet: All-In on Digital, http://smartenterpriseexchange.com, August 26, 2013.
33. Chloe Rigby, Tesco pledges to be ‗best multichannel retailer‘ for customers, http://internetretailing.net,
April 19, 2013.
34. Graham Ruddick, Tesco plans to accelerate global investment in digital technology,
www.telegraph.co.uk, March 23, 2013.
35. Justin Schamotta, Clubcard vs Nectar: the ultimate guide, www.choose.net, March 22, 2013.
36. David Moth, How Tesco uses Facebook, Twitter, Pinterest and Google+, https://econsultancy.com,
January 24, 2013.
37. Gemma Goldfingle, Robin Terrell, multichannel director, Tesco, www.retail-week.com, January 18,
2013.
38. Ian Quinn, Scan-as-you-shop technology set to roll out across Tesco, www.thegrocer.co.uk, September
29, 2012.
39. Jonathan Thomas, Social media: retailers react to consumer interaction, www.just-food.com, July 31,
2012.
40. No Longer Just a Supermarket: Why Tesco is Evolving the Retail Model with its Digital strategy,
www.exchangewire.com, June 21, 2012.
41. Dave Chaffey, An example of aligning the tesco.com digital marketing strategy with retail growth
strategy, www.smartinsights.com, June 18, 2012.
42. Anna Drennan, How Tesco Leads The Way in Social Customer Service, www.conversocial.com, May 29,
2012.
43. Tesco‘s phenomenal tale of turnaround success, www.smartcompany.com.au, May 23, 2012.
44. Kathleen Hall, Tesco CIO Mike McNamara on the retailer‘ digital future, www.computerweekly.com,
April 30, 2012.
45. Alex Lawson, Analysis: Warming up shoppers to the new Tesco, www.retail-week.com, April 27, 2012.
46. Alex Lawson, Tesco trials electronic shelf pricing, www.retail-week.com, April 16, 2012.
47. Sean Deale, Tesco‘s Click and Collect drive-thru for Groceries. Is it worth it?, www.instoretrends.com,
March 20, 2012.
48. Matt Brain, Tesco updates shopping app to include time-saving barcode scanner, http://thenextweb.com/,
October 26, 2010.
49. Jonathan Brown, Cashing in, the couple who dreamed up Tesco Clubcard, www.independent.co.uk,
August 17, 2010.
50. Rebecca Marston, Tesco‘s triumphs under Sir Terry, www.bbc.com, June 8, 2010.
51. Albrecht Enders and Tawfik Jelassi, Leveraging Multichannel Retailing: The Experience of Tesco.com,
52. Bernard Marr, Delivering Success: How Tesco is Managing, Measuring and Maximising its Performance
(API Case Study), www.cpdopportunity.com, June 23, 2009.
53. Tim Clark, A history of Tesco: The rise of Britain‘s biggest super market, www.telegraph.co.uk, April 15,
2008.
54. Viliyana Novoselska, The Secret Behind Tesco‘s Success, Richmond Journal of Finance, Volume-I, Issue
II, www.richmond.ac.uk, March, 2007.
55. Sir Leslie Porter, Shrewd and uncompromising chairman of Tesco, www.independent.co.uk, March 25,
2005.
56. Nunzio Quacquarelli, Adopting multi-channel strategies in an e-world, www.theguardian.com, September
12, 2001.
57. Tesco Annual Reports (2010-2014)
58. www.tesco.com
59. www.tescoplc.com
60. www.dunnhumby.com
14

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IBS Center for Management Research

TESCO’s Digital transformation

 2015, IBS Center for Management Research. All rights reserved.

TESCO‟s Digital transformation

TESCO ON SOCIAL MEDIA

INTEGRATION IN MULTICHANNEL STRATEGY

Category Percentage Change

How your handset works

Scanning made simple

Snapshot of an Issue Solved through Twitter

Tesco Stores Tesco Extra Stores Tesco Dotcom only Stores

Components of Tesco‟s Multichannel Strategy

Organization Structure of Tesco

Source: Adapted from Tesco Annual Report 2011-12.

Digital Transformation Model

Digital Retailer Stage II

Digital Retailer Stage I

Source: Prepared by Author.

Suggested References and Readings

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