Former Tesco boss gives advice to retailers
When Sir Terry Leahy retired as Tesco CEO in 2011 it wiped nearly £800 million ($A1.28 billion) off the company's market valuation.
Under his lead the company rose from the status of a third-ranked UK struggler to a STG60 billion organisation with nearly 5,000 stores worldwide.
One of the important features of Sir Terry's reign was the introduction of the Tesco Clubcard, launched back in 1995.
As well as giving customers a small discount and a collection of reward points it also gave the supermarket a chance to collect data on people's purchasing habits - the first step towards the data collection that takes place commonly now.
Sir Terry, speaking from London to launch his new book on management strategy, 'Management in 10 Words,' says there is nothing sinister about basing the relationship with the customer around information, provided the information is used to serve customers better.
"If (customers) feel that the retailer is using it against them, it won't be successful," he said.
Meanwhile in Australia Coles And Woolworths have reignited their ongoing battle with store cards recently.
Coles' Flybuys is offering a 10 per cent discount on selected items after a minimum $50 spend and Woolworths' Everyday Rewards is offering 20 to 40 per cent discounts, with no minimum spend.
Sir Terry said that in Tesco's case: "We found an unrestricted offer was better, because you don't exclude any customers."
"Tesco's was a success because we gave every customer something," he said.
Another things that Tesco became famous for was increased focus on own brand labelling.
Sir terry says that such brands are good for everyone concerned, they offer producers market access and customers lower priced goods. however, he warns that it should not be overdone.
"It's very important that the retailer doesn't favour private labels in terms of shelf space, because it should always be the customer who decides what they want to buy," he said.
He says there is a maximum amount of shelf space between 30 and 50%, that should be given to own brand products.
"If a retailer tries to push it further than that, usually sales suffer overall," he said.
The penetration of supermarket labels in UK stores is around 45 per cent and in Australia, around 15 per cent.
While private labels are blamed for the disappearance of local brands, Sir Terry says the global brands of multinational food groups are also a contributing factor.
Source: businessspectator.com.au