Tesco Chief Operating Officer Tony Hoggett's speech to Retail Week Live 2017
8 March 2017
A transcript of Tesco Chief Operating Officer Tony Hoggett's speech to Retail Week Live 2017
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I realise that I’m now standing directly between you and some cocktails, so over the next 30 minutes I’m hoping to share with you how I and Tesco are thinking about 3 things.
A UK retail industry built on serving customers,
- How the UK retail environment is changing?
- How our values underpin how we’re improving our service.
And why we have reasons to be hopeful for the future.
CELEBRATE BRITISH RETAIL
It’s so good to be here at Retail Week Live, which amongst other things I think is a real celebration of retail.
And there’s a lot to celebrate.
- 2.8 million people are employed in UK retail (in 2015)
- The retail industry generated 5% of total UK GDP (in 2015)
- 7 UK retailers are in the FTSE 100
It’s also one of a handful of industries where it’s still genuinely possible for people to progress from the shop floor to the boardroom.
Like many in the room, I’m proof of this. I started my Tesco career as a trolley boy and checkout operator as a 16-year-old student, to being Chief Operating Officer today.
Another reason to celebrate is that many of our retail businesses have stood the test of time.
Through decades of industrial and technological change over generations of British families changing the way they live and shop.
Tesco is one of these businesses.
It was almost 100 years ago when Jack Cohen founded Tesco using his £30 demob money to set up a market stall in East London.
By 1960, Jack had 500 Tesco stores.
And today we employ around 500,000 colleagues, have around 6,900 stores in markets across the world.
In the UK over 50 million transactions through our 3500 stores and deliver groceries to the homes of over 640,000 customers, every week.
A long way from Jacks’ humble beginnings. So how did he do it?
Well, Jack knew there is only one boss. The customer!
The customer can make or break a company, just by shopping somewhere else.
100 years on, serving the customer is still at the heart of everything we do in Tesco. Our drive and purpose for service is still as strong now as it was then.
Serving shopper’s a little better every day.
Of course it’s not just Tesco that believes in customer service. Every business in the world talks about the importance of serving their customers well.
The reason I like our purpose so much is that it talks about serving customers a little better every day.
Continually improving our customers experience with us.
Again, every business talks about the need for continual improvement.
One year from now, we have to be considerably better at serving customers than we are today. Just to stand still.
If you’re not getting better, you’re getting worse. There’s no in between.
So how do we do this?
We listen and watch. Listen to what customers want and watch their ever changing shopping habits to consistently deliver what they need.
There are two key ways to continually grow the business.
Attract new customers.
And encourage your existing customers to spend more.
So the question is, how to attract and keep customers?
Same question as before, but the answers have changed!
The things that attract new customers today are very different to the things that attracted and kept customers a decade ago - and will change again in the decade ahead.
So how have we been doing lately?
It would be fair to say that like many other retailers Tesco has had it ups and downs.
Thankfully we’ve had more ups than downs in the last couple years with eight quarters of volume growth and significant improvements with a sharper range, record levels of availability, lower and more stable prices, and of course improvements in customer service.
CUSTOMERS’ NEEDS ARE CHANGING
You heard from Matt Davies last year that customers are changing their habits faster than ever before.
With 20 fewer minutes to prepare food and 20 fewer minutes for shopping than they had 20 years ago.
Customers have more choice both in stores and online and are shopping with more purpose today than ever before.
They are also generally less loyal to one supermarket.
Customers have more access and visibility to our products, prices, promotions often before they’ve even left the home.
A large number of customers are now beginning their shopping trip at home, browsing retailers and building lists to then either shop online or drop into a store.
COLLEAGUES LIVES ARE CHANGING TOO
So as customers change, our colleagues are changing too.
They also face the same daily life pressures.
Short of time, increasing household costs and a greater need for strong reward: benefits, fairness, security and career opportunities.
Even more importantly, they want to give loyalty to a company which shows responsibility to their welfare and they want to enjoy their time at work.
PURPOSE AND VALUES
So, how do we face into these changes?
Having a clear sense of purpose and a strong set of values is a good start.
But there’s a lot of research showing why a core purpose doesn’t always work.
They change too often.
It’s hard to remember and quote.
The colleagues in the business don’t feel connected to it and their short term task doesn’t link to the long term purpose of the business.
Tesco colleagues feel ours does work:
It’s simply, ‘Serving shoppers a little better every day…..’
It allows every colleague to come to work and either directly or indirectly work towards this every day.
In our latest colleague survey, 91% of our colleagues said they understood the purpose, and 96% were motivated by it.
To bring this to life, we have our values.
During the recent transformation in Tesco, it would have been easy to re-write our values. The values our colleagues formed 20 years ago.
We consulted our colleagues and they overwhelmingly wanted to keep them the same.
They said our values still held true – going forward, we just had to apply them more consistently across the whole business.
So what are our Tesco values?
WE TREAT PEOPLE HOW THEY LIKE TO BE TREATED
For those that want it, retail has been a steady and reliable job for life. Often working five days a week, on the same checkout or filling the same aisle each shift.
I’m so proud to say that Tesco has hundreds of colleagues with us today who have been with us for 40 years. Some even 50!
I firmly believe that we can still provide this long term work for the next 40 years, however we will need to change and be more agile and adaptable for the changing customer.
When I was a checkout operator, flexibility meant going for my break 30 minutes later.
Flexibility today and even more so in the future may mean working across several departments and maybe different stores.
This of course needs some level of operational change but importantly, changes to culture.
I think the traditional Monday to Friday, nine to five on the same department will be less relevant to our sector.
I strongly believe flexible working across one company is possible.
Responsible employment with the power of the terms being in the hands of the colleague can be a good thing.
A colleague will be able to use their own mobile phone to look at their pay, book a holiday, order uniform and also check in for any shift in any of their trained departments across any region or store in the UK that they wish to work.
We must not lose the strength in our ability to develop colleague careers and offer progress within the company, whether that be to work on new departments, offices or to move into management.
We need to develop retail leaders of the future.
As well as training on traditional retail skills, we need to develop new skills and careers in areas like data science, search recommendation and performance marketing.
The BRC have said retailers now employ 100,000 people in roles that didn’t exist five years ago.
We recognise the importance of developing our colleagues and that’s why this week we announced a new apprenticeship programme for current colleagues.
2,500 colleagues will benefit from training this year. We’ve created apprenticeship programmes in retail and distribution, and from September onwards, our ambition is to launch more apprenticeships in the office which will help colleagues further develop key business and technology skills.
I firmly believe that Tesco and retail in general can still provide enjoyable, exciting, fulfilling jobs for life.
Our second value…
NO ONE TRIES HARDER FOR CUSTOMERS
It’s easy to write No One tries harder for customers - but can difficult to deliver with over 50 million transactions each week.
Customers only see ‘One’ Tesco and their perception of service can only ever be as good as the worst experience in any channel they shopped with us.
So we've set out to be ‘The most helpful and friendly grocer in the UK’ and we know that consistency across all of our channels is so important when it comes to great service.
Our customers expect the same level of service whether they shop online, in store or speak to us over the phone, and looking forward, this complexity will only grow.
So what do customers see as helpful?
They tell us often it’s the little things.
I see and hear great stories every day that help reinforce this; like Sarah one of our grocery home delivery drivers who delivered a weekly shop to a customer who had forgotten to order milk. Sarah stopped at a local Express store and took it to the customer’s house.
Looking after our colleagues so that they can look after our customers is so important.
We're developing a culture where recognising and empowering great service is part of what we do and reinforces the service behavior that will differentiate us.
And our third value…
EVERY LITTLE HELP MAKES A BIG DIFFERENCE
Every little help really can make a big difference and I’m proud of the work we do in the community.
You may have seen this week some of the work we’re doing on reducing food waste.
We’ve pledged that no edible food will go to waste from our UK operations by the end of 2017.
Our Community Food Connection programme uses innovative technology to connect over 3,500 stores with charities and organisations to offer surplus food each day. So far we have donated over six million meals to people in need this way.
We also help people in the communities we serve through schemes like Bags of Help. Over 4,000 local charities have received grants through the carrier bag levy. 90% of the funds raised by customers has gone to small organisations.
INVESTORS AND SUPPLIERS
And we also have a very important duty to shareholders and our suppliers investing in our business for long term growth.
We’ve fundamentally changed how we work with our suppliers, introducing transparent payment terms, sustainable farming groups and a supplier helpline which makes it easier for suppliers to receive help when needed. We’re also delighted to be 1st, up from 6th, In the Advantage Survey on supplier and retailer performance.
And for those who invest in our business we need to ensure we make the right decisions for customers and in doing so create sustainable value.
A large area of my work over the last couple of years has been making the business more efficient.
Anyone can take costs out of a business. But how do you take costs out and improve service?
We’ve made lots of changes over recent years: closing unprofitable stores, DC’s and selling businesses.
We’ve made tough decisions, but these changes have all been made with a focus on improving customer service.
I may be the COO, but I still have many close friends at all levels of the business. I often find myself having to look my friends in the eye to explain a decision I’ve made.
That can be incredibly difficult sometimes, but it is also extremely important to me.
That connection acts as my own personal test. If my friends I’ve worked with for decades question something, it means I have to question if it fits with the values Tesco stands for.
Amid all the significant changes we’ve made so far, I’m pleased that we’ve not only improved our service to customers but also managed to steadily improve colleague morale.
So with all these pressures in a tough market and responsibility to so many people, how can we be so positive about the future?
Well, it’s certainly not for the faint hearted, but what a time to work in such a fantastic industry.
An industry that’s so important to the UK economy.
That’s such a great driver of employment and social mobility.
An industry at the forefront of retail innovation.
All of this, in the most competitive retail market in the world.
This is a brilliant industry…
And it’s up to many of us in this room to keep it that way!