International failure Flashcards
Why did Tesco China fail and when was it launched & closed?
Launched 2004, closed 2013 after loss-making all 9 years
Poor understanding of local consumer habits:
Chinese shoppers are variety seekers, shop around for discounts and low brand loyalty
Tesco thought the clubcard offering would work in China - but 63% of Chinese consumers who had loyalty cards participated in at least 4 other retailers
Chinese cities high concentration of single person households and limited storage apartments, so less preference for bulk buying - heavy traffic prevented Chinese consumers heading to the large stores on city outskirts as Tesco had hopes
M&S strong performance ?
Fell out of the FTSE100 almost 5 years ago with profits below £100m, now grew operating profit by 59% to £400m+ in 24FY, Clothing & Home up 24%
Additionally, large competitors with difficulties has aided them, Debenhams closing and John Lewis struggling.
Clothing also been positive, revamped their line and in a good position in which they have better perceived quality than peer alike H&M, Zara, but far cheaper than more premium brands
EU peer negative performance, why is that?
Bit of a mixed bag
Carrefour down big due to losing market share, poor performance
(-25% LTM)
Alhold delhaize acquiring and maintains market share in key regions like Netherlands and Belgium
Tesco Venture into America
Lack of research like the China case not the only reason - Supermarkets entering vastly different markets don’t know the industry as well as they think they do, despite extensive research.
E.g. Tesco tried to expand into california in 2007 through ‘Fresh & Easy’ brand. Did extensive research like setting up fake shops and even having execs live with Californian families for an insight into shopping trends. Still pulled out of the US in 2013 after losses of £1.2bn
Tesco in Central Europe
Revenue has remained broadly flat, but tough inflationary environment as some of those countries even had negative retail sales prices.
Losing market share / overtaken in Hungary and Slovakia to Lidl
Wouldn’t be surprised if it was sold to focus on core business again.
Could Tesco expand internationally?
Incredibly long track record with minimal success. Central Europe struggling, exited China, US, Malaysia, France, Spain, Japan.
Have expressed desire to further simplify. So I would say unlikely for now, but certainly wouldn’t rule it out
