Philip Clarke speaks at the World Retail Congress in Singapore

20 Mar 2013

It’s great be back at the World Retail Congress, and I am delighted to be in Singapore. The theme of the conference is retailing in a connected world. We could hardly have a better setting.

Marina Bay Sands, Singapore, 20 March 2013

It’s great be back at the World Retail Congress, and I am delighted to be in Singapore. The theme of the conference is retailing in a connected world. We could hardly have a better setting.

For centuries, Singapore has been a hub of global trading activity. It has one of the highest levels of trade to GDP of any economy. And today, it is home to one of the most sophisticated retail markets in the world.

So this is a great place to stand back and look at the changing retail landscape. And this Congress is particularly significant for me: I have unfinished business at the WRC.

Last year, at the World Retail Congress in London, I said that we were seeing a tectonic shift in our industry. I argued that the choice was clear: to lead the revolution, or become victims of evolution. Since then it’s become clearer than ever what that means.

At Tesco, this Christmas, we had our biggest ever week for internet sales activity. We now have half a million dotcom orders each week.

Around the world, global e-commerce activity hit $1 trillion in 2012 – driven by a 33% increase in Asia Pacific. And this year, research suggests that Asia Pacific will overtake North America as the number one market for online sales.

So the evidence is clear: this is a time of seismic change in our industry – and today I want to take my argument to the next stage.

Last year, I spoke about how the way people shop is changing. Today, I want to talk about how the role of our industry must also change.

It’s all about retooling for the 21st century. And there are three key parts to what that means:

We need to change the way we connect to the global supply chain.

We need to change the way we connect to customers online.

And we need to change the way we connect to wider society.

In a few moments, I want to say a few words about each of these areas. But first, let me describe the new retail landscape as I see it.

Whichever way we look, we’re seeing a new age of global connectivity. It’s bottom up, fast moving, and highly disruptive.

It’s changing the way we source and it’s changing the way we share new ideas. Around the world, a new wave of creativity has been unleashed. No single country or company has the lead on innovation today. The flow of ideas is north-south as well as east-west. The winners of the future will be those companies which can take ideas from all parts of the planet and apply them in different ways and to different places.

All this means that for those us in the industry, we need to rethink the way we retail. For years, it’s been about developing best practice in the home market and then exporting it from on high. But this model has run its course. We all need to be quicker, smarter, more fluid and more interactive. We need to change the landscape, not just adapt to it.

There’s also a social side to this transformation. The digital age has created a new era of accountability – and this means that the world’s expectations of big corporates are changing day by day.

Now people want to know: what do we stand for? How do we help society? As well as being a big global company, we need to be part of something bigger than ourselves.

At Tesco, we’re well placed to lead in this new landscape. It’s not just that we are part of the world’s changes; we are also changing the landscape through our own innovations.

The big advantage we have is our scale. With our more than 515,000 colleagues working in 14 countries, providing 75 million shopping trips, and working with tens of thousands of suppliers, we’re already connected to so many of the smartest trends which are changing the planet.

In our management teams, we are building a truly global perspective. The Tesco leadership team today have all benefitted from experiences in different markets. During our twenty years running businesses outside the UK we have learnt much and we are able to transfer ideas more quickly than ever thanks to the ubiquity of the internet.

Above all, we have a strong presence in the emerging markets here in Asia. Our businesses in South Korea, Thailand, Malaysia, India and China together employ 120,000 people. Last year, they reported sales of over US$16bn. We’re proud that our Leadership Academy for the Group is in Seoul, Korea.  It is the first zero carbon training facility, and a hub of global learning for our company.

But critically, success in the future isn’t just about having a strong physical presence in Asia. It’s about tailoring that presence to what our customers need. We call this approach Glocalisation – the powerful blend of global strength and local understanding.

Last year I called time on the old “space race” – I said that in the future, we wouldn’t simply grow by buying more real estate, but instead change the way we engage with our customers and embrace digital retailing. As I say to my teams: it’s really rather simple. In the future, app development is going to be just as important as property development.

That applies equally here in Asia. Take our Tesco Lotus business in Thailand as an example. We already have over 1,200 stores across the country, a floor space of over 13m sq ft and a market share of 13%. At the same time we’re really changing our focus.

Part of that is about building new Express stores to reflect the growth of convenience shopping around the country. And an even bigger part is our new online grocery service in Bangkok. Order on line, receive delivery at home or collect from the car park using Click & Collect.  Our Tesco Lotus App was one of the most popular downloads in Thailand when it was launched. 

It’s all about building our business based on what matters in each market – global innovation, and local application.  Glocalisation.

Connecting customers to quality products affordably and conveniently.

Connecting producers and suppliers to new markets, at home and abroad.

And connecting our business to the wider social challenges facing the world.  

My starting point in this new age of connections is that we need to embrace the idea of scale. Scale as a positive. Being a big global business means being part of the global supply chain.

We’re living in a world of growing global demand. Populations are rising. Pressure on resources is growing more acute. All this means that the role we play as a big global retailer, connecting customers to suppliers around the world, is more critical than ever before.

The simple truth is that a global supply chain, through which we can source high quality foods from different countries and sell it affordably, conveniently and at scale is one of the great inventions of the modern age. Providing affordable food from around the world as part of a varied diet has been a big driver of social progress over the last century.

It is for this very reason that over the past five years we have built up major sourcing hubs across Asia, Europe, Africa and the Americas. We now source from well over 60 different countries worldwide.

Here in Asia specifically, we have sourcing hubs in Sri Lanka, India, Bangladesh, China and Cambodia. We source a range of products – from food to TVs and clothes - from over 15 countries in the region.

And overall, we source more than 20,000 of our global product portfolio to the rest of the Tesco Group, including our F&F clothing brand and our popular consumer electronics brand Technika.

What’s more, thanks to this Asia-wide supply chain, we’re able to source hundreds of millions of US dollars worth of high quality cuisine to customers in Europe. This food isn’t some occasional luxury. It is becoming part of people’s diets every day.

But for me, one of the biggest advantages of a global system is the opportunities it brings to small businesses.

By opening our network of stores to local suppliers, we create a route to market for tens of thousands of farmers and manufacturers.

We want to be the partner of choice to these suppliers, earning their loyalty, and working with them to help grow their businesses in genuine partnership.

My point is this: the fact that we can source and export so many products regularly and reliably is a great thing for our customers and suppliers.

Many communities around the world have a selection of fresh fruit and vegetables, at prices they can afford, for the first time because of Tesco.

We’re really proud of that – and we can only do it because we’re part of a global supply chain.

That takes me to my second point: consumer connections. We’re all seeing the same thing. Mobile commerce is growing at an astronomic rate. More and more people are using tablets and smartphones. 600 million people use Facebook every day.

Asia is at the epicentre of this transformation. In Korea, the number of users of smartphones and tablets doubled between 2011 and 2012. In India, the number of Facebook users rose from zero to 60 million in 2 years. And more than one in five of all internet users today are in mainland China.

For all these reasons, digital is now intrinsic to retail. That’s why, in 2013, we will invest three quarters of a billion US dollars in technology, up threefold in three years. We also employ more than 5,000 technologists at our development centre in Bangalore.

And we’re expanding our digital presence in all of our markets this year. Already live in Seoul, over the coming weeks our dotcom service launches in Bangkok and Kuala Lumpur, and in the summer in Shanghai.

And for me, one of the most exciting things is that our digital innovation is being driven and refined by the demands of our Asian markets.

I’m sure you’ve all heard about our virtual shopping walls in Korea. But also consider China, where we’re leapfrogging the establishment of a modern mail system by launching digital Clubcard over the coming year.

My point in highlighting all these changes is to say this: to compete in the new era of retailing I believe that Tesco has to be more than a retail company. We have to become a technology company too.

And an example of that is blinkbox. At Tesco, we’re already one of the UK’s leading retailers of recorded movies and TV series, music and books. But the way our customers choose to enjoy entertainment is changing because of new technologies.

We want to be in the vanguard of this transformation – and that’s why we are working with our blinkbox team to develop new digital entertainment services.

Last month we launched Clubcard TV in the UK, a free service providing family friendly movies and TV for our Clubcard members.

And I can announce today that over the coming months we will be launching two exciting new digital entertainment services to complement blinkboxmovies – blinkboxmusic and blinkboxbooks.

These new services demonstrate our total commitment to providing the very best entertainment as easily as possible for our customers.  

It’s all about building on what we do best – focusing on the customer and anticipating their needs.

That brings me to the last point I want to make: the retailer’s role in society.

As the world is changing, becoming smaller and more connected, so the role of businesses in global society has to change. More and more people are saying: we want companies which create value for wider society, not just for their shareholders, customers, and colleagues.

At the heart of this change is the rise of the socially conscious consumer, who actively chooses socially responsible brands over cheaper alternatives. And what’s remarkable about this trend is that it has coincided with the economic downturn. So despite the decline in people’s spending power, customers are looking for something more than low cost and more choice. They want to see businesses making a positive contribution to the wider challenges facing the world.

Let me be clear: this goes much further than corporate governance or corporate social responsibility. This is about taking our skills and capabilities as one of the world’s largest retailers, and applying them to some of the most significant challenges in society.

At Tesco, we believe we have a big role to play here. Our purpose is to make what matters better for our colleagues and customers, their communities, and the world. And we can do that because of our scale. It’s because we’re big – because we’re global – that we can make the important things better for people in their daily lives.

Let me give two examples of what I mean.

Right now, there is a big challenge around global unemployment. In some countries, some people have been jobless for years. It’s particularly tough for young people in Europe – and this is something we can do something about.

At Tesco, we pride ourselves as a provider of opportunity. You could even say it’s in our DNA. And a great example of how we do this is our Regeneration Partnership stores. We launched the first one in Leeds in the UK thirteen years ago to help tackle chronic, long-term unemployment. Today we have 50. Taken together, they’ve created jobs for over 5,000 people who were previously long-term unemployed.

So this is a great model for tackling unemployment. But the big question is: what if we could take this to scale? What if we could build regeneration stores in more of our markets to help create much-needed opportunities there?

In Hungary, that’s exactly what we’re doing. In May 2012 we launched our first ‘Regeneration Store’ at Debrecen. 100 of our 165 new colleagues there had previously been out of work for more than six months. It’s just the start of what we can do together in the future by creating more opportunities at scale.

My second example is about food waste. Around the world – including here in Asia – we’re seeing a growing concern about the volume of food that goes to waste. According to some estimates, a third of all food is lost or wasted. 

Our starting point needs to be greater transparency over where waste occurs across the value chain. In our own operations, we work hard to be efficient. But we also want to act more widely, reducing waste across the value chain.

We know that, particularly in the more developed markets, there is a lot that we can do to help customers reduce the amount of food they waste. We also know that, particularly in developing markets, we can do more to develop supply chain infrastructure and to reduce the amount of unintended waste.

Our fresh approach will be to embrace end to end chains, through real partnerships, not to act as transactional players within chains. It’s about transparency, working across the supply chain to innovate and deliver customer focused value creation.  You’ll be hearing more about it over the coming year.

But this is just the start of what we want to achieve. There are other ways too where we can work together to make a real difference.

And to help channel our efforts, we have instilled a new value as a company. We’ve called it: using our scale for good.

The point is that if our scale enables us to create value for our customers, then scale for good is about taking that idea one step further, and creating greater value for society as a whole. 

Let me finish by going back the beginning. We’re living in a new age of connectivity. It’s transforming every retail company. The future cannot just be about developing low-cost goods and rolling them out to new markets. We need to rethink the way we retail.

Are we open, or are we closed? That’s the big question which will define the future of our industry. This is a world of hyper-speed choice and global connectivity – and you fail the moment you stand still.

Make the right choices now, and there’s so much we can achieve in the future. If we capture the opportunities of a world of connectivity, we can create new value, not just for customers and suppliers, but also for wider society.

This is it. The world is changing and we have to change to.

Thank you. 

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Tesco is the UK's largest retailer and one of the world's leading international retailers. Tesco has more than 6,000 stores worldwide, employing almost 520,000 people in the 14 countries in which it operates.
Our core purpose is to create value for customers to earn their lifetime loyalty. Our success depends on people: the people who shop with us and the people who work with us.