Tesco (the econ. apr 2013) students' version
5
Tesco The end of the space race April 20th 2013 / From the print edition Britain’s biggest retailer tries to adapt to fast-changing shopping habits THE Tesco “superstore” in Kensington is a minor marvel. A rainforest-like mist wafts across the vegetables. A pizza bar beckons shoppers to choose their own toppings. A computer the size of a small pony suggests recipes and proffers lists of the ingredients needed to whip them up. Such delights were not uppermost in investors’ minds when Tesco, Britain’s biggest retailer (and largest private-sector employer) reported dismal results on April 17th. But they hint at better things to come. Profits before tax tumbled 51.5% in the year to February, their biggest-ever drop. Much of the decline came from admitting past mistakes, especially Tesco’s bungled foray into the United States. The grocer took a £1 billion ($1.5 billion) write-down of its investment in Fresh & Easy, which failed to convert American consumers into fans of cellophane-wrapped fruit and automated tills. All that remains is to sell the chain. Other international operations suffered, too. South Korea’s partial ban on Sunday trading dented profits there. Austerity and unemployment hurt in central Europe. The biggest surprise, though, was an £804m write-down in the value of Tesco’s British property holdings. The retailer had bought these as sites for big new stores years ago, when British grocers were still vying to outstrip each other in a “race for space”. Now Tesco’s boss, Philip Clarke, admits the stores will never be built. “We’ll be focusing much more on building our multichannel credentials,” he said. What he means is that, to keep up with changes in the way Britons shop, Tesco has to make it easy to buy whenever and wherever it suits them. This shifts the grocers’ race onto new turf. Inflation and a sluggish economy are squeezing household budgets. Pressed for time, people are shopping more often and closer to home. Increasingly they are ordering online. Last year just under 4% of grocery shopping took place online. But Britain is ahead of the rest of the world and online sales are rising fast. Tesco’s jumped 12.8% in the past year. Out-of-town mega-markets may be unfashionable but the race to open “convenience” stores catering to busy urbanites is very much on. In Britain, Tesco will open about the same amount of net new shopping space this year as it did in 2012—some 1.4m square feet. But the mix will shift towards convenience stores. Morrisons, which had hung back from the small-space race, recently jumped in. It is taking over defunct shops from such high-street casualties as HMV, Jessops and Blockbuster to convert into groceries. Online, grocers are battling against each other and against Ocado, a 12-year-old e- commerce outfit whose delivery vans are ubiquitous in posh south-eastern neighbourhoods (though it has yet to make much money). While venturing abroad Tesco underinvested in Britain and lost market share. Mr Clarke, who has been in charge since 2011, is trying to claw that back. His £1 billion scheme to “build a better Tesco” seems to have recovered from
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Transcript of Tesco (the econ. apr 2013) students' version
Tesco
The end of the space race
April 20th 2013 / From the print edition
Britain’s biggest retailer tries to adapt to fast-changing shopping habitsTHE Tesco “superstore” in Kensington is a minor marvel. A rainforest-like mist wafts across the vegetables. A pizza bar beckons shoppers to choose their own toppings. A computer the size of a small pony suggests recipes and proffers lists of the ingredients needed to whip them up. Such delights were not uppermost in investors’ minds when Tesco, Britain’s biggest retailer (and largest private-sector employer) reported dismal results on April 17th. But they hint at better things to come.
Profits before tax tumbled 51.5% in the year to February, their biggest-ever drop. Much of the decline came from admitting past mistakes, especially Tesco’s bungled foray into the United States. The grocer took a £1 billion ($1.5 billion) write-down of its investment in Fresh & Easy, which failed to convert American consumers into fans of cellophane-wrapped fruit and automated tills. All that remains is to sell the chain. Other international operations suffered, too. South Korea’s partial ban on Sunday trading dented profits there. Austerity and unemployment hurt in central Europe.
The biggest surprise, though, was an £804m write-down in the value of Tesco’s British property holdings. The retailer had bought these as sites for big new stores years ago, when British grocers were still vying to outstrip each other in a “race for space”. Now Tesco’s boss, Philip Clarke, admits the stores will never be built. “We’ll be focusing much more on building our multichannel credentials,” he said.What he means is that, to keep up with changes in the way Britons shop, Tesco has to make it easy to buy whenever and wherever it suits them. This shifts the grocers’ race onto new turf. Inflation and a sluggish economy are squeezing household budgets. Pressed for time, people are shopping more often and closer to home. Increasingly they are ordering online. Last year just under 4% of grocery shopping took place online. But Britain is ahead of the rest of the world and online sales are rising fast. Tesco’s jumped 12.8% in the past year.Out-of-town mega-markets may be unfashionable but the race to open “convenience” stores catering to busy urbanites is very much on. In Britain, Tesco will open about the same amount of net new shopping space this year as it did in 2012—some 1.4m square feet. But the mix will shift towards convenience stores. Morrisons, which had hung back from the small-space race, recently jumped in. It is taking over defunct shops from such high-street casualties as HMV, Jessops and Blockbuster to convert into groceries. Online, grocers are battling against each other and against Ocado, a 12-year-old e-commerce outfit whose delivery vans are ubiquitous in posh south-eastern neighbourhoods (though it has yet to make much money).While venturing abroad Tesco underinvested in Britain and lost market share. Mr Clarke, who has been in charge since 2011, is trying to claw that back. His £1 billion scheme to “build a better Tesco” seems to have recovered from the discovery earlier this year of horsemeat in meals labelled “beef”. He has retrained staff and added to their numbers (“there’s a twinkle back in their eye”, he claims in a corporate video). Large stores are to become “destinations”, tempting shoppers to linger rather than flee. The one in Kensington has a Euphorium bakery, part of Tesco’s growing collection of restaurant-type investments. If only the profits were as appealing.
Questions:
A. Please match the following definitions with words in the text.
1. (noun) A shop that sells in small quantities directly to the ultimate consumer.
2. (verb) To summon or signal typically with a wave or nod / to attract or invite
3. (adjective) Lacking merit, particularly bad
4. (verb + preposition) to transmit indirectly and by allusion rather than explicitly
5. (verb) to decline suddenly and sharply (as in price)
6. (noun) a brief excursion or attempt especially outside one's accustomed sphere
7. (compound noun) a deliberate reduction in the book value of an asset
8. (verb) to strive for superiority : compete
9. (verb) to go faster or farther than: to get ahead of
10 (noun) synonym: territory
11. (verb) to supply what is required or desired -usually used with to-
12. (adjective) no longer living, existing, or functioning
13. (noun) a group that works as a team: organisation, company
14. (phrasal verb) to get back by strenuous or forceful means
15. (noun) a quick flash of light : a sparkle or flicker of light
16. (verb) to stay somewhere beyond the usual or expected time
Speaking (in pairs or small groups) :
A. Name all the retailers / grocery chains you know.
B. Do you know which international groups (if any) are behind each one of these retailers?
C. Has anything changed recently in Spain in this sector? Is there a new market leader? If so, how would you explain its success?
D. Do you know any similar "destination" type of supermarket like the large Tesco store in Kensington mentioned in the text? What do you think about it? Is it something that can work / is working in Spain? Why?
E. If you were to create the perfect grocer/supermarket, which concept would you choose? Where would you locate it? What would your communication angle be? Try to think of a name?...
Correction:
Tesco
The end of the space race
April 20th 2013 / From the print edition
Britain’s biggest retailer tries to adapt to fast-changing shopping habitsTHE Tesco “superstore” in Kensington is a minor marvel. A rainforest-like mist wafts across the vegetables. A pizza bar beckons shoppers to choose their own toppings. A computer the size of a small pony suggests recipes and proffers lists of the ingredients needed to whip them up. Such delights were not uppermost in investors’ minds when Tesco, Britain’s biggest retailer (and largest private-sector employer) reported dismal results on April 17th. But they hint at better things to come.
Profits before tax tumbled 51.5% in the year to February, their biggest-ever drop. Much of the decline came from admitting past mistakes, especially Tesco’s bungled foray into the United States. The grocer took a £1 billion ($1.5 billion) write-down of its investment in Fresh & Easy, which failed to convert American consumers into fans of cellophane-wrapped fruit and automated tills. All that remains is to sell the chain. Other international operations suffered, too. South Korea’s partial ban on Sunday trading dented profits there. Austerity and unemployment hurt in central Europe.
The biggest surprise, though, was an £804m write-down in the value of Tesco’s British property holdings. The retailer had bought these as sites for big new stores years ago, when British grocers were still vying to outstrip each other in a “race for space”. Now Tesco’s boss, Philip Clarke, admits the stores will never be built. “We’ll be focusing much more on building our multichannel credentials,” he said.What he means is that, to keep up with changes in the way Britons shop, Tesco has to make it easy to buy whenever and wherever it suits them. This shifts the grocers’ race onto new turf. Inflation and a sluggish economy are squeezing household budgets. Pressed for time, people are shopping more often and closer to home. Increasingly they are ordering online. Last year just under 4% of grocery shopping took place online. But Britain is ahead of the rest of the world and online sales are rising fast. Tesco’s jumped 12.8% in the past year.Out-of-town mega-markets may be unfashionable but the race to open “convenience” stores catering to busy urbanites is very much on. In Britain, Tesco will open about the same amount of net new shopping space this year as it did in 2012—some 1.4m square feet. But the mix will shift towards convenience stores. Morrisons, which had hung back from the small-space race, recently jumped in. It is taking over defunct shops from such high-street casualties as HMV, Jessops and Blockbuster to convert into groceries. Online, grocers are battling against each other and against Ocado, a 12-year-old e-commerce outfit whose delivery vans are ubiquitous in posh south-eastern neighbourhoods (though it has yet to make much money).While venturing abroad Tesco underinvested in Britain and lost market share. Mr Clarke, who has been in charge since 2011, is trying to claw that back. His £1 billion scheme to “build a better Tesco” seems to have recovered from the discovery earlier this year of horsemeat in meals labelled “beef”. He has retrained staff and added to their numbers (“there’s a twinkle back in their eye”, he claims in a corporate video). Large stores are to become “destinations”, tempting shoppers to linger rather than flee. The one in Kensington has a Euphorium bakery, part of Tesco’s growing collection of restaurant-type investments. If only the profits were as appealing.
