There were applauses around business quarters last Thursday when Tesco CEO Dave Lewis finally unveiled his disaster recovery plan.
Ever since his appointment as Chief Executive last October, shareholders and the market have been wondering when was he going to cook up a whiz-bang recovery plan.
Disappointing sales the past two years…
Four consecutive profit warning…
Accounting scandal…Tesco is in freefall.
One can only imagine the pressure the poor guy was under to come up with some type of recovery plan no matter how ridiculous it is.
His recovery plan reminds me of a question a government official asked Ben Affleck in Argo “You don’t have a better bad idea than this?”
He could not have come up with a better bad idea than the one he came up with:
Sell Tesco assets, including its historic Cheshunt headquarters….
Close 43 stores…
Cancel plans for 49 new stores….
Cut costs by £250 million a year.
Why Are Those Ideas Bad?
For a start, he failed to answer the two fundamental questions that needed to be answered if Tesco were to re-emerge from its current predicament.
Those questions are:
• Why is Tesco sales down?
• Why are Aldi and Lidl eating Tesco lunch?
The only problem Tesco has right now is, Tesco sales are down.
What he needed to concentrate on was, how to increase Tesco sale and profit.
Is closing store and selling assets going to increase Tesco sales and profit?
He was presented with two options:
• Figure out why Tesco sales and profit are down
• Reduce cost
He choose the easier option…reducing cost because figuring out why Tesco sales and profit are down is too hard.
Why Are Tesco Sales And Profit Down?
The most simplistic reason for low sales in Tesco is, Tesco has lost touch with its core market.
What Tesco and the other big retailers are failing to realise is, consumer buying behaviour have changed.
Secondly, like his predecessor, he failed to ask the question Sir Terry Leahy asked when he took over as CEO of Tesco: ‘who do we serve’?
In his book ‘The One Thing You Need To Know’ author Marcus Buckingham said when he asked sir Terry how he transformed Tesco into a global retail power house, Sir Terry responded that when he took over Tesco, the first thing he did was ask the question ‘who do we serve’?
The answer came that Tesco served the ‘Ordinary Joe’, Sir Terry went on to redesign Tesco stores to appeal to the ‘Ordinary Joe’.
One of the things he did was increase the numbers of checkout in the stores.
When asked why he choose the checkout as a way of demonstrating to Tesco customers that the retailer was serving them, he responded: what better way to show respect for someone than to show respect for his time.
Just in case Mr. Lewis has not gotten the point I tried to make with the story about Sir Terry, let me make it explicit.
Sir Terry focused on two things when he took over Tesco:
• The customers
• The store design
The reason he focused on those two things is, he understood that increasing retail store sales and profit required three things:
• Beautiful store design
• Attractive visual merchandising display
• Effective loss prevention strategy
In order to design a beautiful store and create an attractive visual merchandising display, you first need to know who you are designing the store for i.e. the customer.
Mr. Lewis predecessor failed to learn this simple lesson and ended up under the bus.
Even when I pointed out to him that the strategies he was pursuing was doomed to fail, he did not listen.
So Mr. Dave Lewis, as I did with your predecessor, I am telling you the strategy you want to pursue is doomed to fail.
You have the opportunity to course correct now.
You do not need to close down stores.
The questions you need to be seeking to answer are:
• Why are shoppers snubbing Tesco?
• Why are Tesco customer choosing Aldi and Lidl over Tesco?
I hope I will not have to write your obituary next year.
As you are already aware…The only thing worse than doing nothing is doing the wrong thing.
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