Tesco

In the world of large distribution and tough price competition topped with quality, freshness and availability, Tesco today is among the best chains in the world. A supermarket success depends on one major factor: The customers. The customers are satisfied by prices and quality. From another angle, a supermarket's survival is also crucial, hence his margins.

Pressure on price is high; also on quality and availability. Therefore the most a highly developed information system should be in place.

Tesco competes with giants like Wall Mart, therefore he has to squeeze his prices. It’s no secret to anyone that Supermarkets drain their margins on some products to reach 5% and even less, depending on the importance of these goods in the eyes of the consumers. Some products such as blades, razors, shampoos and soaps become a benchmark in terms of pricing. Consumers compare prices from the same brand between a supermarket and another and judge how prices fluctuate from one to another and accordingly adopt the cheapest retailer. Hence a cost management from the supermarket should be highly efficient. They also have to remain profitable, so they turn to the suppliers.

The suppliers need to generate as much as possible profit to Tesco. Hence he calculates his profits by linear meter (metre lineaire in French). The supermarket needs to maximize the use of each meter of his display area. He therefore calculates margin from the absolute dollar value generated by a given product versus the space it occupies. An additional charge is also added as a shelf rent. Through this procedure, Tesco, tends to remain competitive in pricing, uses the space in the most efficient way possible and satisfies the customers.

That full procedure is almost 100% automated and calculates margins from sales and the other from rent and finally the total average, helping Tesco in his negotiation with his suppliers.

A way of maximizing profits and customer satisfaction is stock management. Availablity of products on the shelves is crucial. The supermarket should also optimize the total use of space without losing storage or warehousing space. He therefore needs to monitor very efficiently his stocks by keeping ordering very smooth, smart and fast. His sophisticated system generates on a semi daily basis a series of purchases to be sent out to suppliers to replenish the inventory and to assure no out of stocks are there.

One more advantage Tesco has is client servicing. Hence, they created the membership cards or loyalty cards on which customers collect points according to purchases and allow the supermarket a high level of information to segment and study the consumers habits and behavior. By returning visits of the customers, the supermarket collects data to classify them through age, gender, phone number, geographic area, income, amount spent, type of purchasing, high interest products etc… and hits them on their sensitive points by special promotions, gifts and dedicated offers that make each customer feel he’s a very special one and the “only one” they care about. Again, the most difficult job in the world, customer relationship and management, is operated with the help of another highly developed information system.

Tesco, to maintain his margins of sales, rent of space, volume of sales and rush of customers must by all means satisfy a very difficult task: please the customers. He therefore uses a sophisticated information system in each area of operation to maximize its use and input and to keep the customer as “The king”. Without a smart and highly efficient information system, handling almost in full the operations, Tesco would have been obliged to work in a different way and would definitely not be as efficient.