Tag Archives: Tesco

As has Tesco, Amazon has increasingly diversified away from its core, but at what cost?

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Amazon’s latest quarterly results have raised more than a few eyebrows in the business world. Despite its position as a sell-anything-to-anyone internet retailing organisation, it posted significantly larger losses [$544 million] than expected, and warned that Q4 2014 looks set to further disappoint.

Yet investors will be well aware that it doesn’t take much for a loss-making online company with such a global reach to generate significant profit. Just look at Facebook, which went from a loss of $138m in 2007 to over $1bn in the black five years later.

However, Amazon has been growing rapidly since it was founded in 1995 and investors might well be tiring of its struggle to turn vast revenue into consistent profits for shareholders. Amazon continues to expand and grow, but fails to yield profit despite being a global brand with huge recall.

Amazon’s continued focus on developing new products and services, often unrelated to its core function as an online retailer, perhaps risks alienating consumers.

As Tesco has recently shown, even huge retailers can see their revenue drop significantly – in Tesco’s case predominantly to discount supermarkets.

Tesco’s focus on huge outlets offering not just traditional groceries but also a wide variety of products and services – such as mortgages and mobiles – coupled with bad PR has seen it alienate its core consumer base. Equally, its efforts to pull in digitally savvy consumers with its budget tablet Hudl and video-on-demand service Blinkbox haven’t caught the public’s imagination as much as Tesco would have hoped.

Tesco is now in the difficult position of having to sell off these peripheral offerings, partially floating Tesco Bank and potentially closing or selling the loss-making video-on-demand service Blinkbox, and getting back to its core retail offering.

For Amazon, however, profits have been hit by the online retailer’s heavy spending on acquisitions, enabling it to move into new product categories, such as its Amazon Fresh grocery delivery service in the US. Yet, at what cost is this to the future of the business?

As Tesco has sorely demonstrated, there’s a fine line between expanding into new areas that consumers want, and over-expansion, which leaves consumers behind and looking elsewhere.

Amazon needs to focus on what consumers want and needs to place this at the heart of any new offering. As former Tesco chief executive Sir Terry Leahy said, the retailer had “focused too much on what it isn’t, rather than remembering what it is”.

As at Tesco, Amazon has increasingly diversified away from its core – the online retail environment – one that many consumers feel loyalty towards and consistently buy from to fit in with their busy lifestyles.

Take the Amazon Fire phone, which has proved to be unsuccessful so far for Amazon. The company wrote off $170m worth of inventory following a lack of sales, which is a staggering 40 per cent of the recent net loss it posted. The smartphone market is highly competitive and despite a great product it seems Amazon gambled on consumer loyalty, which hasn’t translated into sales for the Fire. After all, just because I like Amazon for buying gifts, doesn’t mean I want the Fire phone. It also doesn’t mean I want them to deliver my groceries once a week.

For example, many will sign up to Amazon Prime for the free next-day delivery, which saves money for anyone who regularly purchases on the site and wants their items quickly. Prime subscribers also get access to one title per month from a digital library of Kindle titles and access to Prime Instant Video (usually £5.99 a month). Amazon even announced recently that Prime subscribers can benefit from unlimited photo storage, previously only available to owners of Fire devices. It’s a great range of services for a relatively low fee, but perhaps consumers are still left wondering whether Amazon is a delivery company, a media company or an online grocer.

Tesco made the mistake of attempting to be everything to everyone and we’ve seen the results. Amazon needs to be disciplined about who it is trying to reach, when it wants to reach them and how its offering can help enhance their lifestyle. There are other established brands and retailers who specialise, not dabble. Consumers have a choice and we must never underestimate the importance in providing a seamless customer journey only traditional specialist brands and retail can deliver.

 

Read more at: http://www.ertonline.co.uk/Default.aspx.LocID-05nnew3m8.RefLocID-05n03s004.Lang-EN.htm

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Why the so-called ‘death of the high street’ is a huge opportunity

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It seems a common occurrence that a large retailer goes into administration, leaving yet more ‘To Let’ signs. Town centres saw 406 net shop closures compared to 209 in the same period last year. It’s a gloomy statistic and paints a troubling picture for UK retailers.

It’s matched by worrying signs in the supermarket sector: last month showed the slowest sales growth in 10 years, Tesco is mothballing superstores, while Sainsbury’s is subletting by converting parts of their stores into Jessops shops.

Yet there’s no reason for grocery retailers to panic – quite the opposite. While growth is down to 0.3 per cent, the sector is still growing.

Overall, consumer appetite is on a roll, with the retail sector in general showing 17 months of consecutive growth. What we’re witnessing is a shift in how consumers are buying their goods. Much is made of consumers moving online, but as ONS reminds us, 9 out of 10 retail purchases are still made in-store. Consumers are simply becoming savvier about where to find the best deals or the highest quality products. This is a huge opportunity for those grocers who respond shrewdly to the new market conditions.

Consumer loyalty to one supermarket has been overthrown by the disruptive influence of budget supermarket chains like Aldi and Lidl. The loyal Tesco shopper of a decade ago is now popping into Tesco for their main shop, but then heading to a Lidl or an Aldi to pick up some extras at a lower price.

They might even head to Waitrose or M&S later in the week to pick up a couple of premium items for the weekend. The ‘one stop shop’ of old has been replaced by the new consumer shopping trend of top-up shopping, explaining why Tesco is mothballing Extra stores.

There is now a backlash as consumers no longer find this approach to shopping a good experience or one of value; and increasingly are seeking out specialist retailers for not only the increased choice on offer but also better prices.

More importantly, consumers are also now expecting expert advice when buying non-food products in particular. Perhaps a strategy online retailers such as Amazon will need to start incorporating.

It’s a fragmented consumer journey, but it also provides grocery retailers with the chance to win the loyalty of these new shoppers entering their stores.

First and foremost, building this loyalty has to start on the shop floor. Supermarkets which can’t compete on price need to create appealing and engaging environments while offering their customers the level of care and quality they expect.

Yet research we conducted at Gekko, shows during the last couple of years of expansion – the big grocers haven’t been investing in the areas they should have been. Instead, consumers have been met with decreasing numbers of staff in-store, leaving their experience and relationship with the store to be undervalued as a consequence.

Before its accountancy mishap, new Tesco CEO Dave Lewis recognised the need to shift the focus away from cost-saving towards offering a better service, by increasing the number of staff on the shop floor.

Interestingly, Waitrose, with a proven track record of excellent customer service, is the only non-budget supermarket brand to have increased its market share last month. Clearly investing in the in-store environment is long overdue for some of the big supermarket chains.

Those who ensure that consumers who enter their stores are met with an all-round shopping experience can start to rebuild bridges with consumers. When literally ‘every little helps’ it’s time to stop paying lip service to customer’s journey in-store and put shoppers first.

 

Read more at: http://www.talkingretail.com/opinion/talkingpoints/called-death-high-street-huge-opportunity/

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