Clicks and bricks are the way ahead, says new Tesco chief executive Philip Clarke, as he explains vision for world’s third-largest retailer.
The most powerful man in British retail says the industry is entering a new era as the worlds of online and offline sales collide.
In his first official speech as Tesco chief executive on Wednesday, Philip Clarke said new technology was changing the way consumers and companies behaved and announced various initiatives, including offering groceries as part of its "Click & Collect" service for the first time.
"A decade ago most people put the internet in a silo, a discrete part of their business," he said. "Our big opportunity is to become a multichannel retailer, using our stores to support our online offer and vice versa."
For the last decade the vogue has been for home delivery, as the internet turned the traditional bricks and mortar retail model into "bricks and clicks", but Clarke told the British Retail Consortium conference the digital revolution had "turbocharged globalisation" and was "leapfrogging old structures".
"We now live in a multichannel world," he said, adding that three in 10 UK adults now owned a smartphone and 5 per cent a tablet computer. "So when we talk about the future of the high street, we have to see it in this context, not put it in some silo or reserve. That’s not how consumers view the world anymore. Their high street, their computer, their smartphone – all these offer different ways of shopping and all are converging."
The migration of retail sales to the internet had been considered bad news for established chains like Tesco, but Clarke said store groups were in the ascendant: "If you can put the two together [internet shopping and stores] you have an advantage, at least for now," he said.
Clarke said that by the end of this year shoppers would be able to collect orders of electricals, clothing and homewares placed through its home-shopping business, Tesco Direct, from 600 stores, double the existing number. After a successful trial he said the service would be expanded to include food shopping, although the retailer, which is due the update the City on first-quarter sales next Tuesday, gave no date for the start of this.
Last month Clarke presented his new vision for the world’s third-largest retailer to staff, promising to continue to course set by Sir Terry Leahy, whom he replaced in March. "I see my job is to build on the terrific legacy I have inherited … that does not mean sweeping changes. Far from it." He has modified Tesco’s strategy to include a number of new goals, including the creation of global retail brands, and becoming a multichannel retailer in all 14 of the countries where it trades.
Clarke also promised to nurture its domestic business, which despite ringing up almost one pound in every seven spent on the UK high street has lagged behind rivals such as Sainsbury’s and Morrisons in sales growth. Despite is recent underperformance, Tesco remains the dominant force in UK retail, with a market share of more than 30 per cent. It is estimated that 13 per cent of all the MasterCard and Visa credit card transactions in the UK are made on a Tesco credit card.
UK grocery sales had been weaker in May than in the previous month, when trade benefited from the good weather and extra public holiday, said Clarke. He added that shoppers were "very, very hard pressed" by higher petrol prices.
He added that inflation in Tesco stores was much lower than a recent British Retail Consortium survey, which measured it at 4.9 per cent. Shoppers were reducing the impact of higher prices by buying more goods on promotion and switching to cheaper own-brand goods, he said.
The Tesco boss also said he was "anxious" to be involved in the government-backed review of the high street being carried out by TV retail guru Mary Portas, who in a recent interview was critical of the impact of big retailers like Tesco, and made reference to the recent riot that severely damaged a Bristol store: "You don’t just want huge chains with no meaning to the community," she said.
Asked if Tesco was too big, Clarke said: "We need to be valued not only by our shareholders, but by the communities we serve." He said the chain played a "vital" role on high streets around the country: "I look forward to engaging in a wider debate about the future of the high street."
Source : Guardian