Innovation in Tesco is seen as key for its customers and also to its business. As such the company focuses equally on product as well as process innovation. Core to Tesco’s innovation success has been its focus on managing margins. Right from the start the company’s obsession with efficiency has been used to keep prices low and, in 2007, Tesco managed 1.8% deflation across its product lines. The company has also focused on making the shopping experience as easy as possible for customers – be it in hypermarkets, small stores or online. Tesco Express has led the move of food retailing back into the community and Tesco.com now generates sales of more than £700 million and profits of more than £35 million for the business. In the UK, the service reaches 96% of the population and handles more than 170,000 orders a week.
Like some of its peers, Tesco also aims to improve service and provide better value rather than concentrate on pricing alone. These principles are carried across the business into non-food, services and its international operations. To enable this, the company pays considerable focus on harnessing the creativity of its workforce and encourages staff to come forward with ideas. The company’s prowess in process management applies just as much to its idea management as it does to logistics and store layout.
A key ingredient to Tesco’s growth is the use of well-targeted own-label brands including the up-market ‘Finest’ and low-price ‘Value’ labels. To drive this Tesco has led the field in market insight. Its Clubcard, the most successful loyalty card in the sector, provides Tesco with a class-leading ability to spot emerging trends, attract consumers and influence the behaviour of secondary customers to bring them into the fold.
Another influence has been a coherent strategy for international expansion. As well as expanding into emerging markets in S.E. Asia and Eastern Europe, Tesco is now also tackling the US where its first Fresh & Easy stores opened in 2007. The company’s innovative format differentiates it from existing, homogenous American supermarkets, whilst capitalising on a gap in west-coast grocery retailing. Tesco's expansion of its Fresh & Easy business is hard to go unnoticed. The promise to deliver its 'Every Day Low Price Plus' strategy is set to ensure that Fresh & Easy is well placed to capitalise on US customer's search for quality and value, especially as consumer spending decreases. As it drives growth in new territories and dominates its domestic market, Tesco sees that innovation success is down to four issues - trying new things; not being complacent; being prepared to change; and being determined that no other business will achieve more for customers.
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