Tesco in trouble

The storm over Tesco’s involvement in workfare is a sign of deeper problems for the brand

Tesco are only one of a large number of organisations taking part in the Workfare scheme. Yet the likes of WH Smith, BHS, Wilkinsons, Topshop/Topman, McDonald’s and Burger King have come in for little to no criticism. Tesco, who claim to pride themselves on their understanding of their ‘responsibility as Britain’s biggest private sector employer’, must be somewhat dismayed both at the virtual beatification of J Sainsbury which has pulled out of the scheme, and by the lack of anger directed at Walmart’s Asda, which has not.

The company’s Facebook page is in meltdown. At least David, Sam, Katie-Leigh, Jade and Peter, the moderators of the page, seem a little less under siege this morning. Last night, presumably under instruction, they resorted to pasting the same response to every query, which made them look like fools, and to deleting posts, which made them look shifty. They now stand by while people post incorrect information (such as that Asda aren’t involved or that Sainsbury’s are) or, elsewhere make tautological statements, like this one from Mail Online, at the time of writing the fourth most green-arrowed post:

If people on benefits are taking all the jobs, how are the unemployed supposed to find paid work!

Elsewhere, such as here, people are reminding us why they didn’t like Tesco in the first place. And the only people who seem to be coming to Tesco’s defence are people who argue that ‘it’ is all the fault of the minimum wage, or that the protest is ‘politically motivated’. I’m not sure either of these approaches wins hearts and minds. There are reasonable arguments that the workfare scheme gives (or at least, could give) people valuable work experience. Those arguments are, as far as Tesco is concerned, lost. I don’t know how much the company saved by having taxpayer-funded labour in its stores – some people have estimated it at an annual £1M, others say it’s more – but I guess that the longer this goes on, the savings will be more than lost in decreased turnover.

I’m sure Tesco’s reputation people are, right now, formulating their response. But if, in the meantime, they’re feeling sorry for themselves, they should stop, and think hard. Nike weren’t the only sneaker maker, Nestle the only baby milk formula provider, Cadbury’s the only purveyor of chocolate. But they were targeted in ways their competitors weren’t, and that’s just too bad. In the run up to Christmas, I thought about but in the end didn’t write, a post following conversations I overheard in my local Tesco in Sudbury. You may recall that Sainsbury’s, Tesco and Asda (and possibly Morrisons too but I tend to ignore them) were doing various price match deals. But at the same time, their pricing models became a bit haphazard. You see, shoppers are straightforward folk. We have been trained to understand that if you buy more, the unit price goes down. Buy 500g of something and it will cost less than two packs of 250g.

But something happened recently that seemed to suspend these laws of shopping. Offers got more sophisticated, and that meant that it might actually be cheaper to go for the smaller packets, or to buy fewer items. The problem for the stores is that when you all say you’re cheaper then the other, then the savvy consumer assumes that some of you are being economical with the actualite. So Tesco’s much vaunted ‘Big Price Drop’ led me to hear other shoppers saying, quite simply, that they no longer trusted the store and had to start comparing the prices for different sizes and quantities, or they felt they might be screwed. When you’re having to do that, you no longer believe that ‘every little helps’.

This kind of anecdotal evidence is precisely that, anecdotal. But I am reminded of the rocky patch that M&S went through in the late 1990s. It seemed at the top of its game, and yet the company didn’t read the signs that the world was changing. In the UK right now, big business is nearly as unpopular as the bankers, disabled, benefit claimers and other scapegoats. Tesco should be judging the mood of its customers and basing its strategy accordingly.

In short, Tesco need to go back to basics and put the brand first.

One comment

  1. Tesco does need to worry about its brand reputation but I don’t think the JSA plus expenses story will hurt that in the slightest. Hell, it could even bolster it: the staff are getting paid minimum wage, I’m sure Tesco is passing those savings on to me, the customer.

    Well, there’s a logic there…

    But your other point is surely key. The pricepoint/quality relationship (“value”?) is at the heart of their brand reputation and if people don’t feel it passes muster compared to their competitors they have a problem. And if customers don’t trust Tesco with their pricing strategies they have a real problem. To be sure, there is a distinct shiftiness about Tesco’s price per weight or price per volume guidance. For the same products they will vary their comparison units: Sometimes it’s price per kilogramme, sometimes it’s price per 100g.

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