Comment: Could Tesco learn turnaround lessons from Carrefour?

 As observers of the retail industry and Tesco - one of the great retail success stories of UK Plc in recent times – what are we to make of today’s CEO change?

First, one must recognise the herculean efforts of Philip Clarke to refocus the business.

He has ended unprofitable  foreign adventures, put more staff onto the floor in UK stores, driven the ‘clicks and brick’ agenda and ‘humanised’ stores through better amenities and services.

The fact remains though that profound changes in consumer behaviour - preferences for convenience and immediacy - threaten the viability of Tesco’s erstwhile sweet spot, its huge hypermarket portfolio.

Non-food merchandise sales in these hypermarkets have been in decline for some time due to internet commoditisation.

Also food-based transactions in these stores have declined as a result of convenience shopping and the onslaught of marauding pound-stores and hard discounters.

Consumers are now extremely promiscuous. Wages have not kept track with inflation and people are on a permanent hunt for value - combined with special treating when the need for indulgence arises.

What are the solutions? The recent revival of Carrefour provides some clues.

Like Tesco it struggled with a number of the aforementioned issues and experienced extreme turmoil at a senior level. Last week it declared second quarter organic growth of 4.8%.

What has it done and what can Tesco learn? Essentially it has continued pursuing a multichannel approach but has stopped the rot in its hypermarkets by simultaneously refocusing on value and reviewing its property portfolio.

Carrefour, which is a couple of years ahead of Tesco in turnaround terms, proves that organic decline in the hypermarket segment can be halted.

The appointment of Dave Lewis as Philip Clarke’s successor might eventually lead to the generation of greater footfall at these sites by imaginatively pulling the price lever.

For sure Dave Lewis, an FMCG pricing expert, will understand the art and science of ‘big brand’ price elasticities (price and item sales dependencies), having been on the ‘other side’.

He will also have great consumer channel insight and, crucially, coming from a lean production background will have a sense of what constitutes effective central overhead costs.

To this extent he can choose to pursue a strategy that has greater clarity for all stakeholders – one that returns it to its core purpose – that of providing ‘surprice’, the combination of surprise and price, to customers.

Whatever path Tesco now chooses it obviously owes a great debt to its previous leaders who built it into the third largest supermarket chain in the world.

Whither Tesco? Prosper or wither? You cannot write off a great company after four years of - by its standards - dismal performance.

By deciding what it stands for, perhaps turning back to its original big idea of value, and re-basing the central cost structure of the UK business, attrition at its hypermarkets might at least be stemmed.

Over time Tesco will need to ruthlessly review its portfolio – the race for space is over and now the culling of redundant hypermarket space will inevitably begin.

Don’t write Tesco off. Its mojo will return – undoubtedly after more pain – and like Carrefour it will begin to rise again. 

• Chris Edger is professor of multi-unit leadership at Birmingham City Business School