Strategy For Growth Flashcards
Marketplace is
Launched 4th June
Aggressive rollout, over 10,000 products accounting for +25% of Tesco online stock keeping units
3x site visits per mont
Focused currently on homeware, garden items, toys
Want to become a ‘one stop shop’ for customers
Tesco direct mistake:
Had a similar platform (Tesco Direct) that closed in 2018, described as a “loss making business with no route to profitability”
Tesco direct was on a separate website, lack of traffic, and is fulfilled by 3rd parties meaning much lower costs for Tesco (Direct was shipped and stored by Tesco themselves)
Minimises capex intensity, reduces inventory risk
Finest
Premium range
Finest sakes up 15.7% in the financial year and volumes up 9%
Cost of living crisis has actually resulted in an uptick in demand as customers swap dining out for eating in to cut expenditure plus more adventurous home cooking is a sticky trend of the pandemic
Summary
By maintaining cheapest status Tesco have been able to draw customers from premium competitors, prevent losing customers to discounters.
Additionally, Finest has increased Tesco’s quality perception and growing at a much faster rate than other product types
Puts them in good stead for the future
Share price graph
Large drop in September 2022 across the board as the S&P and FTSE dropped due to a poor US CPI report that dashed hopes of a reduction of policy tightening
M&S big gain with 126% over the 3 year period. Almost 5 years ago M&S fell out of the FTSE100 after poor performance (<£100m profits) - substantial turnaround in strategy on clothing that has much higher margins, M&S profits grew 59% in 2024 - also benefitted from competitors failing with Debenhams going under and John Lewis struggling. Higher quality than H&M, Zara but still solid value and cheaper than premium brands
Carrefour
Jerinimo martins big drop due to
Further Marketplace benefits, how could it be improved?
Adding click & collect could be the next step for marketplace, take advantage of Tesco’s bricks and mortar presence in the UK & ROI
Fulfilled by 3rd parties minimises caped intensity, removes inventory risk - a need to compete on a wider front as 25% of sainsburys sales are non food items
Any potential acquisitions for Tesco to make?
Potentially in the data space as a bolt on to Dunnhumby - retail media has high margins and if the Walmart case (analysts expect $10bn revenue from data business by 2029) is anything to go by retail media, coupled with extensive insights from club card could be hugely profitable
Online potential
Whoosh now covers 66% of the UK, online grocery sales increased 50% from March 2020-22 from covid, trends remaining sticky as online % of grocery sales is 13% compared to 9% pre pandemic
Marketplace potential on profit
Purely an estimate, but 10% marketplace penetration at B&Q drive a 2.5% revenue growth - if Tesco marketplace were able to reach 25% of Tesco online sales that would uplift revenue by c.6%
Marketplace drawing new customers
B&Q marketplace - 50% of marketplace customers had never shopped at B&Q before, attracting new customer potential
