Tesco Competitive Advantages and Strategy

 Tesco was founded by Jack Cohen in 1919. After serving in World War I, Cohen started selling groceries from a stall in the East End of London.

On his first day, Cohen made a profit of just £1 on sales of £4. This humble start marked the beginning of what would become a retail empire.

100 years later, they’re one of the most famous supermarkets in the world, and you’re about to read a blog and steal some ideas from them…

If you’re a business owner who values convenience, wants to avoid horror scandals, and wants to make people cry (happily) with their emotional marketing – this article is for you.

Tesco’s Brand Guarantee Scheme: How to Erase All Risk for Your Clients

In 2015, Tesco launched the Brand Guarantee scheme, essentially promising, “If our basket of ten or more branded products costs more than at a rival store, we’ll refund the difference.”

Knowing you can’t go wrong with buying something because you can get a refund makes you say:

“Come on, why not? Let’s do this.”

After all, you’ll do a great job and deliver an amazing service/product to your clients. When you have to do a good job in order to keep the money, it also forces you to work harder.

If you’re not ready to say, “My product will get you results or your money back,” maybe it’s time to up your product’s game.

Tesco’s Positioning: Pile it Low, Sell it Expensive

Actually, it’s “Pile it High, Sell it Cheap”, but I like my version of it more.

I talk about positioning in most of my case study articles, but Tesco obviously doesn’t read them… (and yet they’re much more successful, so jokes on me I guess…)

While I usually recommend specializing and raising your prices, Tesco sells a lot of different things (clothing, groceries, electronics…) at mostly low prices.

Look, if your competitive advantage is being the cheapest on the market, then by all means, keep doing what works. However, if you own a small/medium-sized business and you want to make more money and have more free time, being more expensive is often the way to go.

By specializing in a specific niche, you massively shrink your competition and you become more valuable.

Even Tesco, that’s known for having cheap prices, sells some items at premium prices.

For example, they sell vanilla ice cream for £1.50 – £3.00, but they also sell a premium version for £4.00 – £6.00 (for the real ice cream eaters)

They developed a lot of private label brands, such as Tesco Finest and Tesco Everyday Value. These brands are for people who care about quality more than they care about price (Have you heard of Costco’s Kirkland Signature?)

Convenience and Accessibility

There’s a variety of Tesco store formats, from large hypermarkets and superstores to smaller convenience stores like Tesco Express and One Stop. This variety ensures that Tesco can meet the needs of different people and shopping occasions.

You should be able to do the same for your business. You might be losing a lot of sales, simply because you don’t have different offers for different people.

If you want to sell courses, you can make different courses at different price points. If you sell suits, you can offer different suits at different price points. You get the point.

Want to know how you can capitalize on this even more? Okay, come closer, you don’t want your competitors to hear this…

Upsell. It’s that simple. Each time your customer buys something from you, try to offer them something else that goes hand in hand with what they just bought. For example, if you teach people to make art, teach them how to sell it too!

In 2012, Tesco introduced the “Scan as You Shop” technology, which significantly reduced how much time people spend at checkout. Not only does it take less time to buy your groceries since then, but you also skip the huge lines that tend to form. Genius, right? No wonder it led to a 20% increase in customer satisfaction!

Tesco’s marketing

For a supermarket, Tesco has got some pretty advanced and modern marketing. They embrace emotion, loyalty, and convenience. Here’s how they do it:

YouTube: Tesco is one of the only supermarkets with a YouTube channel, which sets them apart. You probably heard the phrase “Sell with emotion, not with logic”. If you’re not really sure how to do so, take a look at Tesco’s Father’s Day video.

Here’s another video from Tesco’s YouTube channel

I’m not entirely sure who would click on a YouTube video just to watch an ad, but okay…

That’s a really good video from Tesco. The cook shows an amazing meal, made with Tesco ingredients. If you get inspired and want to recreate it, you know where to go! I strongly recommend showing people what you do/sell on social media – people will be attracted to your product.

Clubcard scheme: Tesco’s loyalty program. You get points and you save money. Simple as that. However, 75% of Tesco’s customers prefer shopping with them because of this rewarding loyalty program (and wide product range). It’s amazing how effective simple things can be!

Online shopping: This tactic is obvious so I won’t spend much time on it. I just want to highlight how even a grocery store has online shopping. If you want to succeed in today’s age, it’s probably wise to consider moving online.

Digital Integration: Tesco has a mobile app that allows customers to manage their Clubcard, shop online, and access personalized offers. If you don’t want to make an app, having an email list will do the trick. You can entertain your customers, give them value, and give them the option to buy from you.

Innovation and Adaptation

Tesco has consistently adapted to the historic circumstances and market conditions. I don’t want to bring up any old traumas, but…

For example, during the COVID-19 pandemic, Tesco increased delivery capacity and developed new services like its rapid delivery service “Whoosh”. They delivered their goods in 30 minutes or less, which was perfect in lockdown.

(source: https://www.tesco.com/zones/whoosh)

In more recent times, they integrated AI to make their products more available and accessible – and you should too! The very article you’re reading right now has some AI in it. I use it to give me ideas and help me with research, which helps me save time. If you’re interested, I use perplexity.ai for it. In what way can you use AI in your business to cut costs or make your life easier?

The Skeletons in Tesco’s Closets: How Tesco Overcame Its Scandals

Let’s be honest, Tesco had quite a lot of scandals. You might even remember some of them, or worse, you might have felt some of them… Here they are:

• The horsemeat scandal: In 2013, it was discovered that some beef products sold by Tesco contained almost 100% horsemeat. Is it so much to ask that the food you buy actually is what you say it is? Thankfully, Tesco made a public apology and made sure that such a mistake never happened again.
  
• Accounting scandal: In 2014, Tesco was involved in a major accounting scandal where it was discovered that the company had overstated its profits by £263 million. This is bad because it misled investors, regulators, and the public eye into thinking that Tesco was doing better than it actually was. Tesco even underwent investigation by the Serious Fraud Office… Doesn’t get more serious than that, does it? To fix the damage, Tesco had to hire new executives, and it became more transparent with financial statements.
  
• Gender pay gap scandal: In 2018, a gender pay gap report showed significant differences between men and women. To overcome that, Tesco implemented talent development programs, flexible working policies, pay structure reviews, and gender diversity targets. Business tip: Be a decent person and respect all your workers, no matter their gender, age, or ethnicity.

Why did I also include the way Tesco overcame the scandals at the end of every point?

It’s because people make mistakes and you’re likely to make some too. I wanted to show you that it’s always possible to work on your mistakes, as long as you’re honest – and you want to improve. As your business grows, investing in a good PR strategy is crucial.

Takeaways

Next time you walk into a Tesco, notice how convenient, easy, and affordable it is to find everything you need.

And most importantly – don’t think of the horsemeat story!

Here’s what you can get out of Tesco’s story:

• Can you make it risk-free for your customers to buy from you? (Brand Guarantee Scheme)
• How position will you occupy in your customers’ minds? (Get everything, from low price, to expensive – be careful if you choose to position this way!)
• How can you be more convenient and accessible than your competitors? (Multiple store sizes, Scan As You Shop)
• Are you constantly innovating and adapting to current trends and events? (30-minute “Whoosh” delivery, AI integration)
• Is there a distinct purpose behind your marketing efforts? (Father’s Day emotional videos, recipe videos)
• Are you ready to overcome scandals and difficulties in your business (Horsemeat story, accounting scandal, gender pay gap scandal…)