Tesco: 'Wal-Mart's Worst Nightmare' | Hacker News Reader

Tesco: 'Wal-Mart's Worst Nightmare'

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60 pointsepi0Bauqu42 comments

Some background: I worked on some Tesco online projects, I have friends who have worked on their data mining. I'm British but I now live in California.

Tesco's data mining is easily the biggest operation I've ever seen. Everything I did at Tesco had a large clubcard component. The clubcard was one of Tesco's major innovations in Britain. It's not dissimilar to a Safeway card. Tesco issue these things in keyfobs as well as card so you always have them.

I've seen people use their clubcard when they buy a newspaper. They don't save money, they don't even get points, it's just habitual.

You can tell Tesco have really nailed data when you see their customer demographic. I saw something in the Guardian (British newspaper) a couple of years back which showed the Tesco customer wealth demographics matching the population norm almost exactly.

When a retail group can organise their stores and retail inventory such that every walk of life uses them they are on the road to success. Most people I know in Britain that don't shop at a Tesco as their primary store have competing store much closer to where they live.

I worked on the checkouts in a Tesco one summer. The number of times I must have said "Have you got a clubcard?" — you're supposed to always ask the customer if they haven't already produced one. I think it's to get people who don't have one to get one just to shut up the assistant.

Those cards are annoying. I don't understand why they are necessary. Don't most people use the same credit card anyway?

Some people pay with cash or check.

I don't think anywhere much accepts cheques in the UK any more. Perhaps some shops, but it's unusual. Worst offenders are probably students paying for drinks by cheque.

The scary part was (at least a few years ago when I had something to do with another Tesco-branded site) that they took one pound in every eight of all retail in the UK.

Not as scary, though, as the fact that they were taking one in every FOUR pounds spent online.

Maybe their super data mining computer will eventually tell them to avoid running out of croissants every single day before 9 AM at my local Tesco...

This is actually the thing that makes me wonder about all the data mining Walmart is supposed to be doing. If I buy a lot of something, shouldn't that mean that they'll be more likely to have it in stock, all else equal? Assuming that their data mining is actually working, I mean. With croissants, I can see where there might be physical issues (not enough capacity for baking them in the store or something), and not enough lost sales to justify the additional cost of rectifying it. However, for things like 2-liter bottles or 12-packs of cans, it's hard for me to understand why their software would allow them to routinely run out, every week, at about the same time. It seems like multiplying a single value in a database somewhere by just over one would fix this problem, but it just keeps happening, week after week, for years.

This sort of thing is one of the most convincing signs of how much future growth there still is left in software. Companies of all types are effectively turning into software companies. And this is still the beginning of the trend.

That reminds me of a Greg Egan short story where a doctor (in the near future) laments that if he wanted to have the most impact helping cure disease he should have gone into software design.

One of the key successes that Tesco had was managing to create a single brand that appeals across all consumer ranges, selling both cheap and premium goods under one core brand. Since then it's become ingrained on the cultural psyche that you get few preconceptions of what a Tesco store is and who it appeals to, it almost just "is".

In the UK, on the higher-end you have Waitrose and M&S Food, on the upper-middle Sainsburys and (before it closed) Safeway, on the middle-to-low end you have Morrisons and Asda and on the low-end Aldi and Lidl. Tesco totally transcends that, selling budget ranges similar to Aldi and Lidl, having prices comparable to the middle-to-low end supermarkets, and selling high-quality goods similar to the high-end supermarkets. I was talking to my Dad about this earlier and he was explaining in the 70s and 80s how Tesco were largely a low-end budget supermarket and how this was a massive shift in the early 90s which lead to them getting the upper hand on Sainsbury's in the market.

This was combined with a move towards large-format stores selling a mixture of non-food goods which weren't popular in the UK until then, movement towards smaller inner-city stores to extend their brand, the fact that unlike other supermarkets Tesco had less of a north/south divide and, of course, the Clubcard.

The genius of Tesco is that it's classless, which is exactly what the UK wants to be.

We shopped at Waitrose at Gloucester Road tube station in London, and there was a Tesco Express right across the street. The prices seemed similar to us but each store had a different selection. I don't remember being asked at Tesco if I had a club card.

They describe the Tesco data mining tools in terms that make them look a lot better (to me) than they feel when you see the result in the store.

Tesco opened a new flag ship store in London, UK, close to where I lived, in Earl's Court. (This was a while ago, so I am sure they are better now. About 5 years ago.) This is in an area which has a number of competitors, all who had fine tuned what the store offered to the local market. The area has people with high income and a lot of (rich) immigrants, think Saudi, stock brokers etc.

The Tesco store's range of products was awful for the first 12 months. It was like they had drop-shipped a generic store, tuned for general suburbia, and then slowly tried to fine tune it. 50% of what they sold seemed to be the wrong stuff for the market.

They later opened a Tesco Express as well, just a couple of blocks away, and compared to the Marks and Spensers Food Only store down the street (which opened a year later) it was awful, really bad. I couldn't go in and actually buy anything I wanted there other than maybe milk. I have visited recently and the Tesco Express is still there, the same crappy collection of goods and hardly anyone seems to buy anything. Whereas the M&S is packed.

It could well be that the area, Kensington / Earls Court, has such a special set of clientele in it that the "standard" model of product provisioning for Tesco just doesn't cut it. But I could have easily come up with a better set of products to sell in there myself and I am just a customer not a retail specialist.

So I guess I am saying that I think there is plenty of scope for improvement.

I don't think Tesco is up market enough for Earls court. Waitrose and M&S etc are always going to do better there really.

Tesco is a great middle-class supermarket for most people.

I think that's more a symptom of poor intra-company communication than a lack of data. In several other publications from various pro- and anti-Tesco sources, I've seen pretty much universal agreement that the datasaet generated by all users of the Tesco loyalty/frequent-shopper card is about the best data of that type in the world, and certainly the best in the UK.

Since they make such a big deal out of using the Tesco card, they have a unique ability to track Tesco shoppers across locations and times, and see who's buying what and where they're doing it - and when you add in all the other non-food services Tesco sells, the data can generate a very good picture of their shoppers. The brunt of all that is that Tesco is very good at finding patterns in sales, predicting what new products will take off (and in what areas), and when something will be popular.

From this, at least if you live in the UK, it's likely that Tesco has a better idea what you're going to buy when you walk into a supermarket than you do.

They are a lot smarter than Sainsburys. I lived in Belfast when Sainsbury opened their first NI store. Their planning obviously just went Belfast=Capital=London so they stocked exactly the same high-end products they would in Earl's court, so 18 brands of extra-virgin olive oil but no bacon.

Tesco's system is smarter. There are 4 Tesco in Cambridge in different parts of town and all have a different type of stock to fit the local market even in such a small town.

Tesco is expert at tailoring their ranges to exactly the sorts of local customers. Most big chains try to standardise ranges across the entire company in search of non-existent efficiencies.

Tesco realises that what a shopper in the poor area of Belfast wants is quite different to a middle-class Glasgwegian, and it profits accordingly.

Wouldn't universal prosperity be Wal-Mart's worst nightmare? Or sustained high gas prices? Or Amazon?

If people became rich and the price-elasticity of demand dropped way off, then a business model based on squeezing every last bit of inefficiency from the supply chain and passing the savings onto consumers to gain market share would be in jeopardy.

Sustained high gas prices? That'll push more people into its target demographic. It will increase shipping costs, but that's a problem for all Wal-Mart competitors, too.

I don't know if Amazon has any plans to target the down-market niche. I am guessing that some things like clothing, food, and housewares most people will never buy online. Also, I don't know that it will ever be as efficient to ship to individual homes as it is to ship to large retail locations. So, I don't think Amazon will ever win out on price.

> Also, I don't know that it will ever be as efficient to ship to individual homes as it is to ship to large retail locations. So, I don't think Amazon will ever win out on price.

Maybe not, but that seems like the wrong comparison. The question is if it will ever be as efficient to ship to individual homes as it is to ship to large retail locations, plus have people get to those locations to pick up the goods.

People seem to be accustomed to that, though. And they enjoy being able to look through various options for a particular good in person. And the store makes out when people buy things that they weren't planning on buying. And most folks tend to batch trips (my family would take a trip to Wal-Mart about twice a month and buy a lot).

Over the past 2 years most of my durable goods purchases where though Amazon. With amazon prime it's free 2 day shipping on most things which is fast enough that I don't really care. With a low base price, zero shipping costs, and no sales tax makes buying brand names online a lot cheaper and I don't need to drive anywhere so it saves me a lot of time. On top of all of that I can research stuff online so I don't have to worry about buying junk with a nice package.

In the long run I think online shopping is going to win as long as shipping costs stay low enough. Delivery costs relate to the number of packages drooped off in the same area so they should drop as online delivery becomes more popular. Toss in all the people who use catalogs and I expect a significant portion of purchases don't require wondering though a physical store.

> "I am guessing that some things like clothing, food, and housewares most people will never buy online."

Take food off that list. AmazonFresh delivers grocery to your home (sorry, Seattle area only for now). I've used this and am really happy with it.

I order my groceries from safeway, usually.

Universal prosperity, I would say no. Just having large sums of money doesn't stop people from being greedy (i.e. wanting to spend absolutely as little as they possibly can).

Universal prosperity just raises the prices across the board until some folks are "poor" again.

That's inflation. Actual prosperity raises the metric of "poor", instead. Today's poor in the US can all afford cars and big screen TVs (to a first approximation), but that doesn't mean they're not poor in comparison to others in the US.

It isn't inflation, though I think we agree -- what I'm saying is that universal prosperity is an unattainable notion: price inflation would necessarily follow any universal prosperity, until there once again was differential prosperity. Rich/Poor is always relative.

I'm not sure we do agree. :) I would say that there is a difference between an increase in the amount of money for the same actual wealth, and an increase in the wealth itself. One is inflation, and the other is growth. Growth can mean that everyone is rich by the standards of previous times in terms of how much of everything they can afford, which could be reflected in the prices for everything dropping. Universal prosperity in computing hardware, for example, has resulted in exactly the opposite of the price inflation you seem to expect.

Search for "inferior good".

I understand what you're saying, but I'm not convinced. Think about, e.g. toilet paper. If you became a million/billionaire tomorrow, you might buy slightly more expensive, more comfortable TP, but you wouldn't spend hundreds of dollars per roll. It's a commodity, you want an ok one, but it gets used up too fast to be worth spending too much on. Walmart seeks to commiditize everything. And to some extent, it has worked.

OK so look up income-insensitive goods.

From a UK comedy program called Time Trumpet: The Tesco Wars

http://uk.youtube.com/watch?v=20IpSch8sSk

i heard that tesco was planning to put carbon footprint on all their product labels. has this been implemented? do they generally have an environmentally friendly or social good philosophy about them, or is this new?

(my first thought when i hear of a huge super market that encourages consumption and driving is not "that'll be good for the environment", but perhaps their products reduce packaging and so on, which would make the success of their own brand especially awesome)

I remember walking up to the Tesco in Ennis. (I think it was Ennis.) From the narrow little street I was on, there was just the glass doors visible, squeezed in between some typical shops. I go inside, and it's this entire sprawling supermarket. It was like the freaking T.A.R.D.I.S.

(Not big by American standards, but I'd been in Ireland for a week, and had readjusted my sense of scale.)

The supermarket and department store situation in Chicago is somewhat interesting. In addition to the two major supermarket chains (Jewel and Dominick's), we have six Whole Foods, three Trader Joe's, four Targets, five Kmarts and exactly one Wal-Mart.

The sole Wal-Mart was only approved about four years ago and is far out on the west side. Another Wal-Mart location was denied.

Tesco looks like a solid competitor, though if I were them I wouldn't slow down now. I would speed up while loans are hard to get. The longer they wait, the longer Walmart has to use their dominance to finance completely duplicating what Tesco has.

But as good as they are, the real worst nightmare for Walmart is what it's always been: unions.

That's interesting. When I was in Thailand a few years ago, I thought Tesco Lotus was a world-wide branch of Wal-Mart. I guess I never gave it a second thought until now.

Same here - 4 weeks in Thailand and I saw a Tesco on a Southern island. I'm from the UK so it was a surprise.

Doesn't Warren Buffet own a stake in Tesco?

Yea. He's got around 2-3% of Tesco. He purchased shares back in 2006/2007 though.

Not sure what he's done since.

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