The McKinsey Quarterly's interview with Tesco deputy chairman David Reid is particularly interesting given the recent news of their purchase of a convenience store chain in Japan. Speaking (presumably) before this information became public, he admitted:
Wal-Mart's decision to buy into an existing retailer would, I think, be our model. Opening hypermarkets from scratch in Japan, as Carrefour has bravely done, puts a huge strain on any P&L account.
He also has some really interesting things to say about their (profitable and popular) foray into online retailing:
Since demand was low, albeit rising, the decision not to invest millions of pounds in building new warehouses but to use existing stores and get staff to pick orders from the shelves turned out to be excellent. It's satisfying to prove all the experts wrong! We restricted capital to the minimum. Instead of spending lots of it, we put a lot of effort into getting the system and processes right: how to manage vehicle loading, for example. You can't be sending out half-empty vehicles if you want any financial returns. But this is exactly what some supermarkets ended up doing - and taking hours to make trips to and from the warehouse. Most of them have had to stop. The degree to which we came under attack for choosing this model rather than the classic warehouse one was incredible. The criticism from some analysts was almost vitriolic. They couldn't understand how we could be so stupid.
And about data mining:
It's very easy to malign loyalty cards. People are always rubbishing them because of the expense. But if you took our loyalty cards away from us, it would be like flying blind... One of the criticisms of loyalty cards is that you get all this data, but you don't know what to do with it all and end up drowning in it. Initially we weren't sure what to do with it. So as with other things, we had to learn. The skill is to know what you want to get out of the system. What you can't have is barrel loads of paper every day saying, "This is every transaction of every customer." We value data-mining skills so strongly that the company we engaged to do the analytical work is now a subsidiary of Tesco.Posted by timo at June 17, 2003 10:05 PM | TrackBack