Tesco’s convenience business is focusing on innovation to satisfy customers rather than differentiation, according to Neil McCourt, managing director of its Metro format.
Speaking at the 2013 IGD Convenience Conference, 21 November 2013, McCourt said there was a danger of differentiating for the sake of differentiation and “that we all homogenise”.
Instead, McCourt said Tesco aims to “understand shoppers and to try to surprise and delight them where we can”.
Innovation at London stores
McCourt presented Tesco’s latest convenience innovations in London and stressed “convenience for Tesco is not really about the size of the store, it’s really about convenient Tesco”.
He showed how Tesco has done very different things in different stores rather than take a cookie cutter approach.
At its 8,000sq ft Regent Street Metro, Tesco increased the space given over to food-to-go and fresh, areas which traded well; and reduced the space devoted to grocery, which didn’t.
”We just give far more space to things that are working and to things the customer wanted,” said McCourt.
Tesco’s decision to “crunch down grocery” was a “dangerous thing to do in a small store and might not work”, admitted McCourt.
Rather than reduce sku options, Tesco reduced sku sizes and the overall store space by 26%. Sales went up with an increase in food-for-now and fresh foods.
Tooley Street insight
At Tooley Street Metro, Tesco took a different tack to serve city workers as well as affluent riverside dwellers and older local residents.
“If we did what we did in Regent Street, we would have got the offer really wrong,” said McCourt.
Instead, Tesco introduced its latest acquisitions including a Harris & Hoole coffee shop upstairs and Euphorium Bakery downstairs. Nutri Centre nutritional products were introduced alongside health and beauty and “worked really well”, said McCourt.
McCourt said the trick was not concentrating solely on data but on insight as well.
“If you put insight and data together you get more of the right solutions,” he said.
At its Marylebone and St John’s Wood Express stores, Tesco has introduced more fresh foods and food-for-now to appeal to a more upmarket catchment and provide an offer better tailored to customer needs.
McCourt said these moves gave Tesco “confidence we can do much more of this in relatively urban, upmarket areas”.
Ethnic orientation at Upton Park
Elswhere, Tesco has relaid its Upton Park Metro store and made it “really bi-ethnic” to appeal to the location’s high degree of ethnicity.
More space has been devoted to flour, oil, rice and juices. Checkouts have also been reconfigured to accommodate a higher number of cash-based transactions versus cards.
Upton Park is also the first Metro store to feature halal meat and chicken counters. McCourt said the revamp has delivered double digit increases in like-for-like sales – significant for a 45-year old store.
Tesco has also opened a pop-up shop in Liss, Hampshire, during the revamp of an Express community store.
The pop-up offered 200 best selling products.
“Customers loved it and it gave something back to the community. We’ve only done it once but will do more and more as we refresh the Tesco Express estate going forward,” said McCourt.
Faringdon Metro: credible offer and drive through click and collect
Tesco’s latest Metro store was opened three weeks ago in Faringdon, Oxfordshire.
The 14,000sq ft branch focuses on categories important to the local community, said McCourt.
These include fresh food, a credible wine and spirits range plus health and beauty – “areas where people like to engage and browse”.
McCourt said Tesco aimed to “have a point of view around all of those areas”.
Serve over counters have been introduced into the store to signal authority in fresh food with breakfast, lunch and dinner options.
A drive through click and collect service has also been attached to the side of the store.
It enables shoppers to order groceries online, which are picked from an Extra store. It provides access to a larger food range plus general merchandise and F&F clothing.
Orders can be collected on the shopper’s way home and are loaded into their car. “We are bringing many of the different Tesco channels together in one small store,” said McCourt. “It’s a great proposition for customers and the signs are they love it.”
Convenient versus convenience
But convenience isn’t just about small spaces, stressed McCourt.
He claimed Tesco’s new Watford store has been developed to become a more convenient shopping destination with food merchandised at the front of the store and general merchandise at the back.
“Convenience is moving to convenient and multi-channel to omni-channel – the lines are blurred,” said McCourt.
McCourt highlighted Tesco’s relationships with its supply base and said it now offers over 4,000 skus from small suppliers, generating £1bn in sales.
“Customers are interested even more so in provenance going forward,” he said. “If Tesco understands customers well, we can delight them and our business flourishes.”