9 October, 2012
How can retailers win in today's tough markets? – Philip Clarke speech
Philip Clarke, Group Chief Executive, Tesco
Speech to the IGD Convention, 9 October 2012
HOW CAN RETAILERS WIN IN TODAY’S TOUGH MARKETS?
Good morning. That short video gives you a flavour of life today: a world in which many people are feeling the pressure of tight budgets and busy, hectic lives. How to make the month’s pay last that bit longer; how to juggle the need to work longer hours with the wish to spend more time with the family; how to find the best value, the best choice.
Those people, and those pressures, are shaping the environment in which we all compete – and there is no better place to talk about how our sector can rise to the challenge than here at the IGD. Thanks to Joanne and her team, the IGD is now widely recognised as the place to debate what matters in our sector. And whether we are retailers or suppliers, one question is high on all our minds: how do we win customers in today’s tough markets?
Yes, of course we need to understand customers inside out. You’ll have heard the phrase “customer insight” many times at IGD conferences. Today, every retailer knows that they need to offer value, choice, convenience and quality. These are the staples, the basic hurdles that any business must jump if it even hopes to be successful in our sector.
For now the challenge is to go much further. It is not just meeting the challenges you saw in that video. We need to rethink our approach to retail overall.
That’s because the digital revolution has transformed how people shop, and what they expect of retailers and brands. With a touch of their finger, a click of a mouse, they can take their custom from one retailer, or one brand, to another. The world is there for them to research, to hunt for bargains wherever they are – at home, on the way to work, in stores. Faced with so much choice, so much information, so many competitors, for all of us involved in retailing this poses a daunting challenge.
My answer to this challenge is very simple. It can be summed up in just two words: get personal.
We need to personalise the entire offer. Retailers’ brands need to be tailored not simply to meet individual customers’ needs now: retailers now need to anticipate what customers want in the future. We need to be one step in front, helping to guide them, making their lives easier, more enjoyable and better.
It’s pretty obvious why we need to get personal. In just a decade or so, digital technology has given retailers – indeed, any brand – the ability to forge a personal relationship with their customers. Not only can we communicate with people directly, one on one, but thanks to the data we now all have, we can understand more about what those customers want, how they shop, their stage in life, their income, their tastes, their habits.
Digital technology is now a part of almost everyone’s life – and the recession, the first digital downturn, has increased its importance. People are shopping online to take control of their budgets, to seek the best bargains, to find out what offers best value. And increasingly they are doing so via their smartphone. By Christmas, we reckon that one in five online purchases will be made via smartphones.
Just to test this argument, let me ask you to pick up your voting machines and answer two simple questions. In the last month, which of the following things have you bought online? Vote now…
And second, have you ever used your smartphone to research prices while out shopping in stores? Vote now…
Those results reflect just how much the world is changing – and with that change comes new challenges. Privacy, and the protection of individuals’ data is obviously one. Another is that all brands need to have one, seamless relationship with the customer – on line and in store. Everywhere a customer experiences the brand, the experience must be of the same, high standard. It must be one that re-enforces the sense that the brand is not just helping the customer here and now, but is helping them make their life better.
But what, in practical terms, does creating a personal offer really involve? How do we, retailers and manufacturers, set about creating a personal offer so that we can win customers?
Thanks in large part to social media, customers’ tastes are changing ever more quickly. The challenge now is to keep up with the change, analyse data rapidly and, crucially, share that data throughout the supply chain, so manufacturers, farmers – anyone who can shape the customer offer in the supply chain can help to personalise it.
Of course this means innovation. But not innovation simply to be providing what the customer wants, here and now. No – to anticipate people’s desires, we need creative, fresh ideas about what we sell, and how we sell it. I like to think that, over the last couple of decades, Tesco has been at the forefront of innovation, underpinned largely by the data that Clubcard reaped, and dunnhumby cleverly analysed. But I know our success in the past cannot guarantee future success. That’s why we have pioneered new innovations - Click and Collect, virtual stores and Scan as you Shop.
Retailers, however, cannot deliver innovation on our own. No company has a monopoly on good ideas. If any company thinks that, it won’t be making the most of the expertise and knowledge that exists through the supply chain.
Instead, we need to create a new spirit of partnership, building on what exists, but going much deeper and becoming much stronger than anything that has existed before.
Tesco has, down the years, forged many strong links with our suppliers. Let me just give you one example – APS Salads. We’ve been working with APS Salads, who are based in Cheshire, since 1989. Our three year supplier strategy gives them the confidence to invest in new plants and to undertake initiatives like reducing their carbon footprint. A member of the Tesco Knowledge Hub, we share customer insights and work hard together to improve their products’ quality, freshness and flavour.
That’s just one of the myriad of cases I could cite. But now I am determined to forge even closer links. The reason for this is very simple: the pace of change is so fast, and the customer offer needs to be so personal, that we need to work with suppliers – be they providing us with goods or services – even more closely.
So we have set up a new dedicated Tesco online community for our international producers, farmers and growers.
Its aim is simple: to forge more productive relationships with Tesco and other producers right across the globe, and right down the supply chain.
With blogs, discussion forums and – crucially – invaluable insight about our customers, I want this to make Tesco much more transparent and accessible to our suppliers. After all, if we want suppliers and manufacturers – many of whom are here today - to personalise what we sell, we have to tell you what customers are telling us.
These relationships are obviously critical to the success of not just retailers like Tesco, but suppliers too. But they reveal something deeper, something that is often overlooked: retail is about people selling things to other people. Be it the farmer to the food manufacturer, the shopkeeper to the customer: personal relationships matter.
So as we enter this new era of retailing, my message to you is very simple.
First, we need to create a personalised offer – an offer that anticipates how customers’ tastes and needs are changing.
Second, to create that offer, we need to innovate: and we can only do that together, in partnership with our suppliers, investing not just money but more time and commitment in our relationships.
Trust and loyalty – these are things we need to foster not just with our customers, but everyone who sells us with goods and services. Only then can we share insights, swap ideas, try new things and, as a result, build the truly personalised offer that customers want.
Thank you for listening.
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