Tesco v Argos

The Tesco brand first appeared in 1924. The name came about after Jack Cohen bought a large shipment of tea from T.E. Stockwell. He made new labels by using the first three letters of the supplier's name (TES) and the first two letters of his surname (CO) forming the word "TESCO". Tesco was founded, as a one-man business, by Jack Cohen in London's East End. He came from a modest background, being the son of a Polish tailor. He began by selling groceries in the markets of the East End after World War I in 1919. At this time rations and supplies were low, so he would buy damaged goods from other businesses and resell them at reasonable prices

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The first Tesco store was opened in 1929 in Burnt Oak, Edgware, London. Tesco was floated on the London Stock Exchange in 1947 as Tesco Stores (Holdings) Limited. The first self service Tesco store opened in St Albans in 1947, and the first Tesco supermarket in Maldon in 1956.

During the 1950s and the 1960s Tesco grew organically, but also through acquisitions to the point where Tesco owned more than 800 stores; the Tesco company purchased 70 Williamsons stores (1957), 200 Harrow Stores outlets (1959), 212 Irwins stores (1960), 97 Charles Phillips stores (1964) and the Victor Value chain (1968) (sold to Bejam in 1986).

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 The founder, Jack Cohen, was an enthusiastic advocate of trading stamps as an inducement for shoppers to patronise his stores: he signed up to Green Shield Stamps in 1963, and became one of the company’s largest clients.

In 1973 Jack Cohen resigned and was replaced as Chairman by his son-in-law Leslie Porter. Porter and Tesco managing director Ian MacLaurin abandoned the "pile it high sell it cheap" philosophy of Cohen which had left the company "stagnating" and with a "bad image".n 1977 Tesco launched "Operation Checkout" which saw it abandon Green Shield stamps in favour of cutting prices and centralise buying for all of its Tesco stores. The result was a rise in market share of 4% in two months.1980s In May 1987 Tesco completed its hostile takeover of the Hillards chain of 40 supermarkets in the north of England for GB£220 million.1990s

In 1994, the Tesco company took over the Scottish supermarket chain William Low. Tesco successfully fought off Sainsbury's for control of the Dundee-based firm, which operated 57 stores. This paved the way for Tesco to expand its presence in Scotland, which was weaker than in England. Inverness was recently branded as "Tescotown", because 50p in every £1 spent on food is believed to be spent in its three Tesco stores.

Tesco produced a loyalty card, branded  ' Tesco Clubcard', in 1995 and later a Tesco Internet shopping service. As of November 2006 Tesco was the only retailerto make online shopping profitable.

Terry Leahy assumed the role of chief executive on 21 February 1997, the announcement having been made on 21 November 1995.

On 21 March 1997 Tesco announced the purchase of the retail arm of Associated British Foods which consisted of the Quinnsworth, Stewarts and Crazy Prices chains in the Republic of Ireland and Northern Ireland, as well as associated businesses for GB£640 million.The deal was approved by the European Commission on 6 May 1997. This acquisition gave it both a major presence in the Republic of Ireland, and a larger presence in Northern Ireland than Sainsbury's which had begun its move into the province in 1995.

In the late 1990s, the typeface of the logo was changed to the current one shown on the top of the page with stripe reflections underneath the typefaces as Tesco used them on their carrier bags. The "typewriter" typeface that the company had been using since the 1970s for its in-store signage was also dropped during this period. In July 2001 it became involved in internet grocery retailing in the USA when it obtained a 35% stake in GroceryWorks.

In 2002 Tesco purchased 13 HIT hypermarkets in Poland. It also made a major move into the UK convenience store market with its purchase of T & S Stores, owner of 870 convenience stores in the One Stop, Dillions and Day & Nite chains in the UK.

In October 2003 it launched a UK telecoms division, comprising mobile and home phone services, to complement its existing internet service provider business. In June 2003 Tesco purchased the C Two-Network in Japan, It also acquired a majority stake in Turkish supermarket chain Kipa.

In January 2004 Tesco acquired Adminstore, owner of 45 Cullens, Europa, and Harts convenience stores, in and around London. In August 2004, it also launched a broadband service. Another acquisiton was the Lotus chain in Thailand

In late 2005 Tesco acquired the 21 remaining Safeway/BP stores after Morrisons dissolved the Safeway/BP partnership.

In mid 2006 Tesco purchase an 80% stake in Casino's Leader Price supermarkets in Poland. They will be rebranded into small Tesco stores.  

• An "inclusive offer". This phrase is used by Tesco to describe its aspiration to appeal to upper, medium and low income customers in the same stores.According to Citigroup retail analyst David McCarthy, "They've pulled off a trick that I'm not aware of any other retailer achieving. That is to appeal to all segments of the market". During its long term dominance of the supermarket sector Sainsbury's retained an image as a high-priced middle class supermarket which considered itself to have such a wide lead on quality that it did not need to compete on price, and was indifferent to attracting lower-income customers into its stores. This strategy has been abandoned since losing the number 1 spot to Tesco and particularly since the arrival of Justin King as CEO in 2004 who has established a new customer-focused strategy closer to that of Tesco.
• One plank of this inclusivity has been Tesco's use of its own-brand products, including the upmarket "Finest" and low-price "Value". The company has taken the lead in overcoming customer reluctance to purchasing own brands, which are generally considered to be more profitable for a supermarket as it retains a higher portion of the overall profit than it does for branded products.
• Customer focus: Sir Terry Leahy, chief executive since the mid 1990s, has taken the bold step of trying not to focus on the usual corporate mantra of "maximising shareholder value". The underlying aim is of course to make higher profits, but there is a clear focus on customer service at the top level of the company.
• Diversification: The company has a four-pronged strategy:
  • "Core UK business" - That is, grocery retailing in its home market. Expansion efforts include making a large-scale move into the convenience-store sector, which the major supermarket chains have traditionally shunned.
  • "Non-food business" - Many United Kingdom supermarket chains have attempted to diversify into other areas, but Tesco has created the largest non-food business of any of them, and became the largest non-food retailer in the UK in 2006. By late 2004 it was widely regarded as a major competitive threat to traditional high street chains in many sectors, from clothing to consumer electronics to health and beauty to media products. Tesco sells an expanding range of own-brand non-food products, including non-food Value and Finest ranges. CDs are one of the best examples, with Tesco Ireland promising to sell all chart CDs (except compilations) for €13.90 compared with prices of around €20 HMV Ireland or Golden Discs at that time.
  • "Retailing services" - Tesco has expanded into areas like personal finance (see below), telecoms (see below), and utilities. It usually enters into joint ventures with major players in these sectors, contributing its customer base and brand strength to the partnership. Other supermarkets in the United Kingdom have done some of the same things.
  • "International" - Tesco began to expand internationally in 1994, and in the year ending February 2006 its international operations accounted for nearly a quarter of sales. It has focused mainly on developing markets in Central Europe and the Far East and now the United States. The medium term aim is to have half of group sales outside the United Kingdom. Tesco rolls out successful UK initiatives in other countries. For example Tesco Personal Finance and Tesco Express convenience stores both operate in several markets.
• Tesco implemented the Clubcard rewards program to gather necessary customer information, which it then used to cater to specific customer needs and potential wants. When shoppers signed up for the card, they automatically submitted their age, gender, and income. Tesco was able to segment their shoppers based on these factors. As soon as the shopper used the card when shopping online or in-store, purchased product information was automatically uploaded into Tesco database. Product information was used to cross-sell additional products and services such as grocery delivery services.

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 Corporate social responsibility

Tesco has made a very public commitment to Corporate social responsibility, in the form of contributions of 1.87% in 2006 of its pre-tax profits to charities/local community organisations. This compares favourably with Marks & Spencer's 1.51% but not well with Sainsbury's 7.02%. Will Hutton, in his role as chief executive of The Work Foundation recently praised Tesco for leading the debate on corporate responsibility. However Intelligent Giving has criticised the company for directing all "staff giving" support to the company's Charity of the Year. Formats

Tesco's UK stores are divided into five formats, differentiated by size and the range of products sold.

• Tesco Extra are larger, out-of-town hypermarkets that stock all of Tesco's product ranges - with free car parks. The first Extra opened in 1997.

  he 100th store opened in the 2004/05 financial year (specifically opening 29 November 2004, located on the Newport Road in Stafford, Midlands). The number of these is now being increased by about 20 a year, mainly by conversions from the second category. Typical size 6,300 m² (68,000 square feet). The largest Tesco Store in Scotland is Glasgow Silverburn in the southside area of the city which opened in July 2006 on the site of the former Pollok store and is around 9,569m² (103,000 square feet) (net sales area). For comparison a standard Wal-Mart Supercenter in the U.S. is around 18,400 m² (200,000 square feet). Tesco Extra stores can also be on two floors, ground floor for mainly food and first floor for clothing, electronics etc.

• Tesco stores are standard large supermarkets, stocking groceries plus a much smaller range of non-food goods than Extra. They are referred to as "superstores" for convenience, but this word does not appear on the shops. It is the "standard" Tesco format, accounting for the majority of UK floorspace. Most are located in suburbs of cities or on the edges of large and medium-sized towns. The typical size is 2,900 m² (31,000 square feet).

• Tesco Metro stores are sized between normal Tesco stores and Tesco Express stores. They are mostly located in city centres and on the high streets of small towns. Typical size is 1,100 m² (12,000 square feet). The first Tesco Metro was opened in Covent Garden, London in 1992. Since then all Tesco branches that have a high street format including those which opened before the Covent Garden branch have been subsequently rebranded from Tesco to Tesco Metro probably to give an identity to the Tesco high street sub brand. The Tesco store in Devizes was the last store to finish rebranding, in September 2006. The store had not been renovated for over 20 years.

• Tesco Express stores are neighbourhood convenience shops, stocking mainly food with an emphasis on higher-margin products (due to lack of economies of scale) alongside everyday essentials. They are found in busy city centre districts and small shopping precincts in residential areas, and on petrol station forecourts. There were 654 stores at 25 February 2006 year end, with a typical size of 190 m² (2,100 square feet).

• One Stop are the only category which does not include the word Tesco in its name. These are the very smallest stores. They were part of the T&S Stores business but, unlike many which have been converted to Tesco Express, these will keep their old name however some have Tesco Personal Finance branded cash machines. There are more than 500 of them. One Stop Stores also work on a different pricing and offers system to the other Tesco stores, and generally have later opening hours than all except the 24-hour Tesco Stores. Typical size 125 m² (1,350 square feet).

• 

In May 2005 Tesco announced a trial non-food only format in Manchester and Aberdeen, and the first store opened in October 2005:

• Tesco Homeplus stores offer all of Tesco's ranges except food in warehouse-style units in retail parks. Tesco is trying this format because only 20% of its customers have access to a Tesco Extra, and the company is restricted in how many of its superstores it can convert into Extras and how quickly it can do so. Large units for non-food retailing are much more readily available. It plans to open at least three more Homeplus stores in 2006. As of 2 October 2006 Homeplus remains a "trial" format and no decision has been taken on expansion beyond the three stores already open and two that will open shortly. The Staines branch opened on 27 November 2006. The newest Homeplus branch opened in Bromborough on 26 March 2007.

 Store summary at 24 February, 2007

As of 24 February 2007, at the end of its 2006/07 financial year, Tesco's UK store portfolio was as follows.

 Tesco Personal Finance

Main article: Tesco Personal Finance

Tesco has a banking arm called Tesco Personal Finance, a 50:50 joint venture with the Royal Bank of Scotland. Products on offer include credits cards, loans, mortgages, savings accounts and several types of insurance, including car, home, life and travel. They are promoted by leaflets in Tesco's stores and through its website. The business made a profit of £130 million for the 52 weeks to 24 February 2007, of which Tesco's share was £66 million.

This move towards the financial sector has diversified the Tesco brand and provides opportunities for growth outside of the retailing sector.

Tesco personal finance offer loans, car loans, Instant access saving accounts, business credit card, bonus credit card (the credit card that pays you interest back), Clubcard credit card (where you can earn 1 point for every £4.00 spent on it) and mortgages. Tesco also offer insurance including travel insurance, pet insurance, car insurance, life insurance, home insurance and car breakdown cover in association with green flag. A key marketing strategy is Tesco offering Clubcard points or free petrol when you buy Tesco car insurance.

The company is currently trialling a finance centre in the Glasgow Silverburn Extra store providing free financial advice and quotes for insurance and loans, this service is staffed by trained Royal Bank of Scotland staff, if sccuessful this trial will roll out to a number of other key and flagship stores

Telecoms

Tesco operates ISP, mobile phone, home phone and VoIP businesses. These are available to UK residential consumers and marketed via the Tesco website and through Tesco stores.

Though it launched its ISP service in 1998, the firm did not get serious about telecoms until 2003. It has not purchased or built a telecoms network, but instead has pursued a strategy of pairing its marketing strength with the expertise of existing telcoms. In autumn 2003 Tesco Mobile was launched as a joint venture with O2, and Tesco Home Phone created in partnership with Cable & Wireless. Tesco Mobile offers both prepaid and PAYG (pay-as-you-go) accounts. In August 2004 Tesco broadband, an ADSL-based service delivered via BT phone lines, was launched in partnership with NTL. In January 2006, Tesco Internet Phone, a Voice over Internet Protocol, VoIP, service was launched in conjunction with Freshtel of Australia.

Tesco announced in December 2004 that it has signed up 500,000 customers to its mobile service in the 12 months since launch. In December 2005, it announced it had one million customers using its mobile service. In April 2006 it announced that it had over one and a half million telecom accounts in total, including mobile, fixed line and broadband accounts.

On 19 December 2006 Tesco Ireland announced that it would enter into a joint venture with O2 Ireland to offer mobile telecommunications services. The service, which will be Ireland's first MVNO, will use the O2 network but operate separately. It will be allocated the STD code 089. As with Tesco's similar service in the UK, it will be branded Tesco Mobile.

 Fuel

Tesco first started selling petrol in 1974. Tesco sells 95 and 99 RON petrol on a retail basis (a fuel developed by Greenergy of which Tesco is a shareholder). Tesco have recently diversified into biofuels, offering petrol-bioethanol and diesel-biodiesel blends instead of pure petrol and diesel at their petrol stations, and now offering Greenergy 100% biodiesel at many stores in the South-East of the United Kingdom.

Problems arose on 28 February 2007 when motorists in South East England reported that their cars were breaking down. This was due to petrol sold by Tesco and others being contaminated with silicon, the fuel coming from the Vopak terminal in the Thames Estuary, where fuel is supplied by Harvest Energy and Greenergy. Then on 2 March 2007 Tesco announced that they were emptying and refilling tanks at 150 petrol stations but was not suspending sales.

Tesco has been criticised with claims that they had been alerted to the problem as early as 12 February 2007. Affected motorists are facing bills of several hundred pounds to repair their cars and, with up to 10,000 cars needing repair, the suppliers could be liable for compensation claims of up to £10 million. However, on 6 March, Tesco offered to pay for any damage caused by the faulty petrol, after printing full page apologies in many national newspapers.

 Brand image

Tesco is one of the few retailers to offer a "good, better & best" policy for its products. This now encompasses several product categories such as food, beverage, home, clothing and financial services.

• Tesco Value - Aimed at families on low income. These products minimize Tesco's costs, including simple packaging to keep the retail cost as low as possible.
• Tesco Brand - Standard products at average store prices.
• Tesco Finest - Aimed at middle to high income customers. These products use superior ingredients and in some cases, Tesco claim they are designed/recommended by top chefs. Has also moved into the Non-Food segment of the market, with Finest Health and Beauty, Home and Clothing lines being stocked in Extra stores.
• Healthy Living - Usually contains lower fat, sugar and salt content than in standard Tesco Brand.
• Organic - Tesco's own brand range of organic foods, has also moved into the Non-Food market, with organic bedding and clothing planned.
• Tesco Kids - Brands aimed at children, although this range is being phased out in certain areas.
• Best Of British - British speciality foods.
• World Foods - Speciality foods from around the world.
• Tesco Wholefoods - Range of natural, unprocessed products such as, dried fruit, seeds & nuts.
• Free From - Food that does not contain certain ingredients (i.e. dairy & nuts).
• Tesco Christmas - Seasonal goods that Tesco only stock during the Christmas period.
• Cherokee - Tesco's own clothing label.
• F+F (formerly Fred for men, and Florence for women) - Another clothing brand at Tesco.
• Technika - Range of Tesco own brand electrical items (from DVD players to televisions and computers).
• Digilogic - Another range of own brand electrical items (from DVD players to televisions and computers).
• Tesco Mobile - Tesco's own mobile network has 3 tariffs; Value tariff, Standard tariff and Extra tariff. The company also has a tariff especially for Tesco employees, called the Staff Tariff.

Tesco Clubcard

Of the major supermarkets in the UK only Tesco and Sainsbury's offer a loyalty card-scheme to customers. Tesco's Clubcard scheme has been operating since 1995 and has now become the largest loyalty card in the UK with around 13 million active Clubcard holders.

Customers can collect one Clubcard point for every £1 (or €1 in Ireland) they spend in a Tesco store, Tesco Petrol and Tesco.com. Customers can also collect points by paying with a Tesco Credit Card, or by using Tesco Mobile, Tesco Homephone, Tesco Broadband, selected Tesco Personal Finance products or by Clubcard partners, Powergen or Avis. Each point equates to 1p in store when redeemed or 4p when used with clubcard deals (offers for holidays, day trips, etc).

Every few months holders will receive a Clubcard statement offering money off coupons with can be spent in-store or on various Clubcard deals.

Customer service

In December 2006 The Grocer magazine published a study which named Tesco as having the slowest checkouts of the six major supermarkets. Somerfield had the shortest queues with an average wait of 4 min 23 seconds. In order of least time spent at the checkout, the other major supermarkets were Waitrose, Sainsbury's, Asda, Morrisons and Tesco. The Grocer also named ASDA as the cheapest UK supermarket (based on 33 items). Tesco was second and Sainsbury's and Morrison joint third.

Tesco price check tends to differ saying out of 7807 (compared to ASDA) products, (Survey carried out between 22 January 2007 and 24 January 2007) Tesco is cheaper:1546, Tesco is more expensive:993 and Tesco is the same price: 5268.

Internet operations

Tesco operates the world's largest grocery homeshopping service, as well as providing consumer goods, telecommunications and financial services online.

Tesco has operated on the internet since 1994 and was the first retailer in the world to offer a robust home shopping service in 1996. Tesco.com was formally launched in 2000. It also has online operations in the Republic of Ireland and South Korea. Grocery sales are available within delivery range of selected stores, goods being hand-picked within each store, in contrast to the warehouse model followed by Ocado. This model, which is now used by Sainsbury's, allows rapid expansion with limited investment, but has been criticised for a high level of substitutions. Nevertheless, it has been popular and is the largest online grocery service in the world. In 2003, tesco.com's CEO at the time, John Browett, received the Wharton Infosys Business Transformation Award for the innovative processes he used to support this online grocery service.

On 1 October 2006, Tesco announced that it will be selling six own-brand budget software packages for under £20 each, including office and security suites, in a partnership with software firm Formjet. As Formjet is exclusive distributor for Panda Software and Ability Plus Software, packages from these companies are likely to feature.

 Operations outside the UK

 

Tesco Hypermarket, Eger, Hungary

Many British retailers that have attempted to build an international business have failed. Tesco has responded to the need to be sensitive to local expectations in foreign countries by entering into joint ventures with local partners, such as Samsung Group in South Korea (Samsung-Tesco Home plus), and Charoen Pokphand in Thailand (Tesco Lotus), appointing a very high proportion of local personnel to management positions.

In late 2004 the amount of floorspace Tesco operated outside the United Kingdom surpassed the amount it had in its home market for the first time, although the United Kingdom still accounted for more than 75% of group revenue due to lower sales per unit area outside the UK. Tesco regularly makes small acquisitions to expand its international businesses. For example, in its 2005/06 financial year it made one in South Korea, one in Poland and one in Japan.

In September 2005 Tesco announced that it was selling its operations in Taiwan to Carrefour and purchasing Carrefour's stores in the Czech Republic and Slovakia. Both companies stated that they were concentrating their efforts in countries where they had strong market positions. Tesco is the grocery market leader in the Republic of Ireland, with a reported November 2005 share of 26.3%. Tesco Ireland also claims to be the largest purchaser of Irish food with an estimated €1.5 billion annually. Tesco entered China by acquiring a 50% stake in the Hymall chain from Ting Hsin of Taiwan in September 2004. In December 2006 it raised its stake to 90% in a £180 million deal. This deal just after Tesco had lost out to Wal-Mart to partner with Indian group Bharti to develop a national retail chain in India.

 United States

February 2006, Tesco announced its intention to move into the United States market by opening a chain of convenience stores on the West Coast (Arizona, California and Nevada) in 2007 named Fresh & Easy.

Announced on March 27, 2007, the California Department of Alcoholic Beverage Control released a Notice of Intention to Engage in the Sale of Alcoholic Beverages for a location in Hollywood, one block west of Grauman's Chinese Theatre. The applicant is Tesco Stores West, Inc., and the name of the business will be Tesco. The application was posted at the location and also mailed to residents within a 500 foot radius.

Non-UK store summary

The following table shows the number of stores, total store size in area and sales for Tesco's international operations. The store numbers and floor area figures are as at 24 February 2007 but the turnover figures are for the year ended 31 December 2005, except for the Republic of Ireland data, which is at 24 February 2007, like the UK figures. This information is taken from the 2007 final broker pack.

Note 1: The business in China was a joint venture at February 2006 (now a 90% owned subsidiary; see above) and its turnover is not reported in Tesco's 2006 brokers' pack.

Note 2: Tesco owned a French chain called Catteau between 1992 and 1997. Its existing single store in France is a wine warehouse in Calais, which opened in 1995 and is targeted at British day trippers. Wine is much cheaper in France than in the UK because the duty is far lower. Turnover is not reported separately.

Note 4:Tesco Stores (Malaysia) Sdn Bhd was incepted on 29 November 2001, as a strategic alliance with local conglomerate, Sime Darby Berhad of which the latter holds 30% of total shares. On 31st January 2007, Tesco Stores (Malaysia) Sdn Bhd's CEO Chris Bush announced in a letter published on Makro Cash & Carry (Malaysia) Sdn Bhd's website that it was purchasing Makro and converting and refurbishing all its stores to a new format called Tesco 'Extra'.  It is not known whether the format will be similar to Tesco UK's format.

 Financial performanceTesco is listed on the London Stock Exchange under the symbol TESCO. It also has a secondary listing on the Irish Stock Exchange with the name TESCO PLC.

All figures below are for the Tesco's financial years, which run for 52 or 53 week periods to late February. Up to the 27 February 2007 period end the numbers include non-UK and Ireland results for the calendar year ended in the accounting year. The figures in the table below include 52 weeks/12 months of turnover for both sides of the business as this provides the best comparative. Including 60 weeks of non-UK and Ireland sales the figures to 24 February 2007 were: revenue £46,600 million; profit before tax £2,653 million; profit for year £2,478 million; basic earnings per share 22.36 pence.

Group revenue for the 26 weeks to 26 August 2006 was £20,735 million, compared to £17,170 million in the 24 week interin period reported in 2005. On a comparable 26 week basis group sales increased by 12.7% and group profit increased by 10.3%.

As of its 2006 year end Tesco was the fourth largest retailer in the world. The three largest are Wal-Mart, Carrefour and Home Depot. METRO was only just behind and might move ahead again if the euro strengthens against the pound, but METRO's sales include many billions of wholesale turnover, and its retail turnover is much less than Tesco's.

At 24 February 2007 Tesco operated 1,988 stores in the UK (2.581 million m², 27.7 million square feet) and 1,275 outside the UK (3.75 million m², 40.4 million square feet). Tesco's market capitalisation on 31 December 2005 was £26.035 billion ($44.8 billion), which was the largest of any retailer based outside the United States.

Criticism of Tesco includes allegations of stifling competition due to its undeveloped "land bank", using cheap and/or child labour, opposition to its move into the convenience sector and breaching planning laws