Philip Clarke's keynote address to the British Retail Consortium Symposium

8 Jun 2011

In his first speech as Tesco Group CEO, to the British Retail Consortium’s symposium, Philip Clarke has described a new era for retailing built around the merging of online and offline channels.

In his first speech as Tesco Group CEO, to the British Retail Consortium’s symposium, Philip Clarke has described a new era for retailing built around the merging of online and offline channels. He said:

-          We are in a new era of retailing, creating great opportunities and challenges for every retailer, and putting even more focus on consumer trust.

-          The digital revolution that has turbo-charged globalisation is transforming how consumers and companies behave.  This revolution is boosting competition, lowering prices, creating new virtual companies, allowing people to sell goods to each other without a middle man.

-          In the era of new retailing, it’s more important than ever that we show that we are on the customers’ side, that we are here to make their lives that bit easier, that bit better. That’s the bedrock of the trust I want to build as we become the model for new retail.

He announced that by the end of the year we will double the number of stores with non-food Click and Collect to 600. In July we are adding clothing to our Click and Collect service and, following a successful trial, we are going to expand the service into grocery shopping, making it even easier for shoppers and making still better use of our stores.

Keynote address to the British Retail Consortium Symposium

8 June 2011

Many thanks for inviting me today.  It’s both a great pleasure, and very appropriate, for me to be giving my first major speech as CEO here at the British Retail Consortium, which does such a fabulous job at promoting our industry and making our case. On behalf of Tesco and all those you represent, I’d like to say a big “thank you” to Stephen Robertson and to the BRC.

When any company gets a new CEO, there is often a lot of talk about what he or she is going to change. Well, I see my job is to build on the terrific legacy I have inherited and to do so with the best team in retailing, a team that is still very much with us. That does not mean sweeping changes, a year zero, out with the old, in with the new. Far from it.

But there are some changes that we will make to meet the new challenges we face today. And it’s those changes, the rationale behind them and what they mean in practice, that I want to talk briefly about today.

But before I talk about what’s changing, let me be clear about what is staying the same. Our world will always revolve around the customer – the customer’s wish for value, range, service, quality, these remain fixed points in our world. All of us here today know that we must deliver on these things or our businesses will fail to prosper.

So Tesco’s core purpose - to create value for customers to earn their lifetime loyalty – that does not change. Nor do our values – no one tries harder for customers, and treat people how we like to be treated. Our vision and strategy has though been refreshed.

My vision is for Tesco to be most highly valued by the customers we serve, the communities in which we operate, by our staff and by our shareholders. I want Tesco to be a growth company; a modern and innovative company; one which wins locally by applying our skills globally.

If you have followed Tesco over the last two decades, much of our strategy will be familiar to you. But there are three new parts to it - becoming a multi-channel retailer wherever we trade,  creating highly valued brands, and building our team. These are important new additions.

Why are we doing that? Because of what I call “new retailing” – a new era of retailing, creating great opportunities and providing great challenges for every retailer, and putting even more focus on consumer trust.

New retailing has, in part, been created by the opening up of new markets. When I joined Tesco much of Europe was behind an iron curtain, China was a country of which we knew little, and Tesco was a UK supermarket that sold food and not much more.

Today, the world has transformed and become a truly global market in large part thanks to the internet. At Tesco we are operating in 13 countries outside our home, with access to 3 billion people – that’s 54% of the world’s population – sourcing what we sell from all corners of the world. If you’d told me back in the early 1980s that we would be the world’s biggest online grocer, that 13% of all MasterCard and Visa credit card transactions in the UK would be on a Tesco credit card, or that there would be six million Clubcard holders in South Korea, I would have said “keep taking the tablets”. But that is what has been achieved.

The opening up of new markets has shaped how we do business. But it is the digital revolution that has turbo-charged globalisation and is transforming how consumers and companies behave.

Comparing prices, reading product reviews, buying goods, writing complaints – in the analogue age, you had to go to a shop, buy a magazine, write a letter. That all took time, involved hassle and often meant spending money.

Today, these things can be done from the palm of your hand, wherever you are, in seconds – and more or less for free.

New communities, virtual nations, have been created by people around the world who share a hobby, a taste, a profession, or simply want to swap stories and tips about every aspect of life. A new science of persuasion has been created in less than a decade.

New technology is breaking down the old way of doing things, leapfrogging old structures. It took a quarter of a century for a mobile phone company to have more customers than BT. Compare that with Facebook – just 7 years old, with 600 million users. Or Twitter – just 5 years, and 200 million users.

All this is unremittingly good news for customers.  The customer always was king, or more usually queen, but now the customer has more power than ever before. Companies are being forced to be more transparent, more accountable, more responsive to customers’ wishes, and to be more willing to engage with them.

This revolution is boosting competition, lowering prices, creating new virtual companies, allowing people to sell goods to each other without a middle man. Back in 1990, you would point to our competitors on the high street. Today, you’re more likely to visit their websites.

This revolution has now seeped into mankind’s behaviour.

I use those words deliberately.

A decade ago most people put the internet in a silo, a discrete part of their business. No more. By 2020, everyone under 21 will see the internet simply as an integral part of their lives.

Three in ten UK adults now own a smartphone, and five per cent a tablet. Their numbers are growing month on month – among all our customers and, at Tesco, among our team.  For them, there is more or less no distinction between life online and life offline.

This is why successful retailers need to be multichannel retailers. We cannot differentiate between online and in store. Our offer online has to be at least as good as, if not better than, that which we offer on the high street.

We’ve made a great start – building the world’s largest and most profitable grocery home shopping business here in the UK and growing in Ireland and Korea. Meanwhile our Tesco Direct online clothing and general merchandise business grew 30 per cent last year. Now I want to go further – I want us to be an outstanding online retailer, the same goal that we set ourselves in store.

This will be a challenge, as the online world is an unforgiving market, prone to the volatility of crowds. Your competitor is just a click away; your offer can be undercut by them in hours if not minutes; and any mistake you make can be communicated to thousands of customers worldwide in seconds.

The internet magnifies certain basic human behaviours. People are now more likely to believe information that comes from people like them. They’re also likely to follow the behaviour of others, and more likely to register things that are new, easy to obtain and simple to understand.

This creates new pressures on retailers. Social networks shape and mould opinion about new products in a matter of minutes. In this fierce, unrelentingly competitive market place, the challenge to earn customer loyalty is that much tougher.

The good news is that the internet allows retailers to understand more about each customer, enabling you to offer a tailored, personal, bespoke service.

We can change the layout, promotion ends and merchandising in our online "shop" every day to reflect customer needs, seasonal relevance and day of week. We can offer Clubcard deals online. We’re introducing a service called "My usuals" on our grocery website which "predicts" the items a customer will buy next, and enables them to add those items to the basket in one click. Customers can read other customers’ reviews on Tesco Direct – which they tell us are trusted far more than any other source of information.

We’re also engaging daily with our Facebook fans.  With news, competitions, discussions and welcoming all comments from customers.  Our recent competition offering Take That concert tickets generated 10,000 new Facebook fans over one weekend.

We’re also using Twitter to offer better customer service. If consumers get frustrated about a product or service, I am keen that we engage with them online and help them resolve their problem in the way they like most – online, fast, now.

But our big opportunity is to become a multichannel retailer – using our stores to support our online offer, and vice versa. Many customers want to buy a product online and then pick it up in store. Thanks to our store network and to Click and Collect, they can obviously do this very easily with Tesco.  So we’ve been introducing quite a few innovations. By the end of the year we will be doubling the number of stores with Non food Click and Collect to 600 so that many more customers don’t have to wait in for a delivery and importantly in July we are adding clothing to our Click and Collect service.

Not only that, following a successful trial we are going to expand the service into grocery shopping, making it even easier for shoppers and making still better use of our stores.

And across the rest of our world, we'll be able to take advantage of multi-channel retailing. We already have home shopping in Ireland and Korea and we added general merchandise and clothing in Korea three months ago. We'll start grocery home shopping in Prague this year and Warsaw early next. We also have plans for operations in Shanghai, Bangkok, Kuala Lumpur, Budapest and Bratislava.

But in this digital world, great service, value, convenience, price – these things are no longer enough to win customers’ loyalty. More than ever before, customers’ decisions about what they buy are likely to be influenced by the power of brands.

A brand is much more than just a product or service. A powerful brand speaks to the consumer’s heart, not just the head. It reflects values, an ethos, a way of life.

Successful companies – not just retailers – use their brands not merely to differentiate themselves from competitors, but to form an emotional attachment with their customers, which in turn breeds loyalty. But that loyalty is built on trust – trust not simply that the price, quality or value is right, but that the brand is living up to its own clear values.

Building this trust with customers is not a new challenge. Tesco has spent decades doing it. First by providing a network of stores that meet customers’ expectations, then building the brand of the products and services we sell.

That brand is rooted in creating value, being efficient and reliable, making life easy and simple, treating people as we like to be treated, and in recognising that we have long term responsibilities to the communities in which we operate.

But now, in the era of new retailing, it’s more important than ever that we show that we are on the customers’ side, that we are here to make their lives that bit easier, that bit better. That’s the bedrock of the trust I want to build as we become the model for new retail.

Every time a consumer comes into contact with Tesco, I want that to be a good experience – and one that bolsters our company’s brand, the brand of our own products and our services.

Once customers have an understanding of our retail, product and pillar brands, we should be looking more actively to extend into new areas.

With F&F clothing, Technika electricals, Go Cook kitchenware, Lighter Choices foods – we’ve shown that we can build brands that consumers trust.  Now we are going to do more.

When customers buy Tesco products, I want them to feel good about it. Getting value for money should not mean sacrificing the sense that you are treating yourself. You should not feel that you’re buying a product that you want to hide at the back of the fridge or the bathroom cupboard.

Delivering these changes depends on our people – the face of our business. Retailing is about selling goods and services – by people, to people. So that personal touch, the sense that the assistant on the shop floor is there to help you when you’re in a rush, that will always be an important part in building loyalty and trust.

The building blocks of any strong team are good training, clear management, clear accountability, and high levels of motivation. But truly excellent teams live and breathe a company’s values. They are trusted to take initiative, to try new ways of doing things, even if that means making the occasional mistake. They are not simply employees, they are brand ambassadors, always on the look out to improve the customer experience, and make the shopping trip that bit better.

These are the hallmarks of a team that creates more value for customers, a team that underpins a modern and innovative company. That team, and that company, is what I now want Tesco to become.

So is Tesco changing? Yes, of course it is. Change is in our DNA. Where and how people shop and what they buy keeps changing, and so must we.

We now live in the age of new retailing, in a multichannel world. So when we talk about the future of the high street, we have to see it in this context, not put it in some silo or reserve. That’s not how consumers view the world anymore. Their high street, their computer, their smartphone – all these offer different ways of shopping and all are converging.

So new retailing does not spell the end of shopping in stores. Virtual reality will never beat the physical experience of picking something up in a shop, feeling it, comparing it with other products on the shelf. Satisfying, reassuring, pleasurable – despite the digital revolution, people will always want to go to the shops.

But in this multichannel world, where there is so much information, choice and competition, successful retailers online and on the high street will be those who understand the power of brands in building customers’ trust.

The core of this industry’s relationship with customers will always be shaped by the experience of buying from us. Buying a meal on the way home, taking out insurance, buying clothes online or purchasing a TV in a store – wherever they buy from us, in store or online, they are touching our brand.

The Tesco brand is part of my life. My first job, aged 14, was stacking shelves at the local Tesco my Dad ran.  I’ve seen our company grow and change. And now it needs to change again. Change to meet the new challenges, and grasp the exciting opportunities of new retailing.

Our world is changing fast, and when the customer changes, we change. Only then can we create value and earn their lifetime loyalty.

Thank you for listening.