Tesco is a British multinational groceries and general merchandise retail chain. It is the third-largest retailer in the world. Tesco was founded in 1919, as a company that set up market stalls. The company did not receive its name till 1924, with the first store even resembling the modern marketplace not opening until 1931. Over the years, it has evolved into the supermarket chain we know today, that has emerged to become the biggest retailer in the UK.
In this case study, we shall discuss how Tesco managed to achieve this feat by looking at its marketing mix, SWOT analysis, marketing strategies and online retail presence.
About the Company
Tesco is a retail company headquartered in England. The company has 7,000 stores world-wide, they employ over 500,000 people and serve tens of millions of customers each and every week. Its core business is grocery retail but the company has also diversified into the retail banking and assurance industries. For the purpose of this blog, we shall only be focusing on Tesco’s retail business. Tesco’s stores stock over 40,000 different products. Their procurement teams work with tens of thousands of different raw materials that are transported internationally every day.
How did a company setting up market stalls transformed into a global retail mammoth? To get a sense of their business and operations, let us first take a look at their marketing mix.
Tesco’s Marketing Mix
A marketing mix is an important tool for determining how a product is marketed, or can be marketed in the future. The marketing mix consists of the 4 P’s of marketing: Price, Product, Promotion, and Place. Let us now analyse Tesco’s marketing mix.
Tesco’s Product Strategy
Tesco has majorly expanded since its inception and now provides a wide range of products in categories including food, electronics, health, books, apparel, home and decor, party and gifting, sports and fitness equipment, beauty, jewellery, baby products, etc. It’s quite clear that Tesco caters to various needs of consumers from across segments and is a retail giant. Tesco has its own brands for these categories, namely Tesco Loves Baby, Tesco Lotus, Tesco kipa, F&F Clothing, Tesco Value, etc.
Tesco’s Pricing Strategy
Tesco has an efficient supply chain network that allows them to take advantage of the economies of scale and offer products at the lowest possible prices. Tesco does not compromise on quality for the sake of price. They regularly entertain feedback from consumers and try to cut down on irrelevant costs to provide low prices. Tesco, thus, follows the cost leadership strategy.
Tesco’s Place and Distribution Strategy
Tesco has 6,900+ stores in 15+ countries including the UK, Ireland, Hungary, Slovakia, France, Japan, etc. Tesco has various types of stores offering varying products and services. Namely, Tesco Metro, Tesco Express, Tesco Extra and Tesco Superstore.
Tesco superstores are large supermarkets that sell groceries and a range of non-food items. Tesco Metros are smaller stores situated in towns and city centres. Tesco Express is an even smaller store that essentially deals in high-margin products. Products at Tesco Express are costlier than the other Tesco stores.
Tesco Extra are large stores that carry a wide range of items including groceries and general merchandise, allowing customers to complete all their routine shopping under one roof.
Tesco’s Promotional Strategy
Tesco focuses on attracting customers through its signature low prices strategy. Tesco makes extensive use of print and media advertising as a tested channel to send promotional messages to current and potential consumers. The company hugely relies on promotional offers to attract and retain customers. They regularly provide ‘buy one get one’ offers and discounts, online as well as in their stores.
For loyal customers, Tesco has an option of availing clubcards. Clubcard owners get points that they can redeem to claim additional perks and discounts.
This is how Tesco manages to maintain its position as a market leader with affordable products, while ensuring accessibility and quality. This is also visible in their marketing strategy, let’s take a deeper look at that.
Tesco’s Marketing Strategy
Tesco’s marketing strategy accurately targets its ideal consumers with the help of its well-positioned brand image. Tesco offers a wide variety of products and services in multiple markets and thus cannot segment on the basis of demographic and psychographic factors. Tesco’s target market is, thus, cost-conscious individuals who are interested in bargains and sales, and value variety. With an aim to reach out to every walk of life, Tesco initially positioned itself as a high-volume, low-cost retailer, but later in the 1990s, it repositioned itself as being one that not only offers low-cost “Tesco Value” items but also premium range products under its “Tesco Finest” range.
With this positioning, Tesco has tried to steer the middle ground, offering ‘value’ products alongside the mainstream, with its ‘finest’ range. They’ve kept no secret of the fact they wanted their supermarket to sell everything that everyone wanted to buy at a price they were willing to pay.
Tesco also constantly expands its product line in an effort to appeal to new customer bases. In 2016, in a much-anticipated move, Tesco launched a new brand of farm-fresh products. This substantial rebranding of products such as beef, pork and fruits appealed to the cost-conscious customers who previously did not buy Tesco products. Before rebranding, products were 15% more expensive.
Tesco’s services are just as reliable through its online channels. Where customers can enjoy the same experience digitally. We shall thus discuss their online and e-commerce presence now.
Tesco’s Online Services and eCommerce Strategy
Tesco has a sophisticated online strategy that enables seamless digital shopping. Tesco’s eCommerce strategy reflects the brand’s commitment to value and convenience. Website visits are just as efficient as in-person purchases. Tesco’s website, just like their stores, is easy to navigate.
Tesco’s online business has performed extremely well over the years. As a result, the company’s online sales increased by 15% in Ireland and South Korea. Tesco has also achieved double-digit growth in the UK grocery market. Since 2010, Tesco has consistently improved its online business in order to provide customers with a worthwhile online shopping experience.
Tesco has also launched Click and Collect services which enable its customers to procure their groceries online and collect them from any store operated by Tesco.
Tesco Direct also has an online platform that allows customers to procure electrical goods, clothing and general merchandise.
The Tesco app is also a major hit and a go-to for customers for direct purchases and payments. The app launched a stand-out feature in 2020 that created a lot of buzz. They introduced the option for customers to shop in-store by simply scanning the products as they shop, through the app. Once done, the customers can simply checkout via self-service or cashier counters. And make the payment through the mode of their choice. This proved to be extremely convenient and quick since people did not have to wait in queues to await their turn.
Along with the many strengths and advantages that we looked at, Tesco also has a number of weaknesses and threats. This is why we also conducted a SWOT analysis of the company.
Tesco’s SWOT Analysis
The SWOT analysis consists of studying a business’ internal and external factors in order to understand and gauge its strengths, weaknesses, opportunities and threats. The following table demonstrates Tesco’s SWOT Analysis:
|Efficient supply chain network||Failed operations in Japan and the States.||Expanding to emerging markets such as South Korea, Indonesia, and Turkey.||Low price supermarkets. The business of the firm is affected by the introduction of supermarkets that offer very low prices and discounts.|
|Leading market share. Almost 27% in Great Britain.||Participating in multiple segments resulting in inefficiency.||Strategic alliances with other brands to attract more customers.||Competition from other giants like Walmart, Lidl and Aldi threatens Tesco’s market share.|
|Geographically diversified. Tesco has a strong global presence.||Decline in operating profits.||Capitalizing further on increased reliance on online channels.||Economic reforms and consequences of Brexit in terms of tariffs, trade barriers, import and export taxes, etc.|
Tesco’s dominance in the market is more than evident. But it needs to capitalize on the available opportunities in order to minimise the threats to the business.
Tesco’s corporate philosophy is essentially cost leadership with an emphasis on availability, variety, and customer service. Tesco is well-known in the United Kingdom and internationally for its focus on value, comfort, and affordability. The Clubcard is critical to the supermarket chain’s continued success because it keeps consumers coming back for more sales. Tesco has built a very loyal customer base and a global brand as a result of its customer-centric approach. Its popularity, on the other hand, is based on its image as a convenient and affordable chain. The retailer promotes customer-oriented activities on its website and in its stores in order to make every shopping experience as smooth and rewarding as possible.
This straightforward yet successful strategy will ensure that the retailer continues to remain at the forefront of the industry.
If you liked our analysis of Tesco’s marketing strategy, be sure to check out the series of case studies on various other companies’ strategies written by our students. IIDE makes its students capable to analyse and curate such campaigns and studies. If you would like to gain these skills yourself, IIDE offers various digital marketing courses for people just like you. Start your journey in upskilling yourself today!
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