In grocery retail, the last few years have been all about the discounters. With their customer closeness, their agility, and their ability to satisfy the nation’s need for good quality, low-cost food, they have run the traditional players ragged.
The Big Four have two options: accept that the game has changed and they are in a phase of managed decline, or do something about it. There are no prizes for guessing the answer.
2015 will be the year that the Big Four respond big style, with meaningful and lasting change. We’re going to see the very structure of retailer/supplier commercial agreement change. Gone, we hope, are the big brown envelopes of cash, replaced with joint plans to regain shoppers, at good prices.
Leading the way will be our biggest retailer, Tesco. To say it has had a tough time of it lately could be deemed an understatement. After years of bossing the high street and out of town retail parks, of late it has seemed that everything Tesco touched turned to dust, with falling sales, accounting controversies and even its Google Glass app launching on the day the technology was binned.
Former directors, notably ex-boss Sir Terry Leahy, have stuck the boot in while numbering all of the ways that it was better in their day. Perhaps most galling for Tesco will the criticism from its old boss that it has lost the trust of UK consumers. For a company that has prided itself in having an almost forensic understanding of what made UK consumers tick, this will hurt.
So is it game over for Tesco?
Let’s get a sense of perspective here. Tesco still has just shy of 30 per cent of the UK grocery market, well ahead of its nearest competitor. Despite profit warnings, it will probably still report profits of more than £1bn for the full year. Tesco has been an immensely successful, innovative and pioneering business and it can be again. Although it has fallen out of favour with UK shoppers, there is still a latent goodwill for it. If new CEO Dave Lewis is able to deliver a relevant and meaningful proposition, then people will follow.
It already seems as if he has taken Leahy’s criticism on board with his newly appointed ad agency BBH and reputation managers Blue Rubicon peppering their announcements with mentions of the ‘T’ word – trust. Tesco has to rebuild its reputation, with shoppers, with suppliers and with its own staff. At the minute there can’t be many people who say they’re proud to work for Tesco and in a customer-facing business like retail, that’s not acceptable. To have satisfied customers, you need satisfied staff.
Despite all these travails, 2015 is set to be an exciting year of change for brand owners as well as retailers. Brands have never had a better opportunity to work for transparent and fairer retailer/supplier relationships. Genuine partnerships between the two can drive footfall and regrow categories and brands, so long as they don’t resort solely to old tactics of price cuts and genuinely add value.
It all looks set to be a fascinating year.
Professor Leslie de Chernatony is a board director at LIFE Agency