As Tesco announces Dave Lewis, Unilever global president of personal care, is to take over from Philip Clarke as CEO, we highlight six challenges he faces when he takes up the reins in October.
Challenge 1. How to drive relevant value
Philip Clarke has led the business through what has clearly been a challenging period. Market conditions have not been favourable, and he found himself inheriting an underinvested store estate amidst a growing shopper flow towards the discounters, principally Aldi and Lidl. In this context he focused on several areas to improve performance in the core UK market, with lower and more stable prices an important part of this. The challenge for Dave Lewis as he inherits the mantle is how to build on the progress so far with making it as easy as possible to shop with Tesco, and encouraging more shoppers to do so. To achieve this he’ll need to create the right combination of price, range and format proposition to appeal to UK shoppers, who are becoming increasingly used to shopping in value focused limited SKU discount stores. This goes beyond the discount challenge: it’s also about building on existing strengths online and in convenience, the other two fast growth channels in the UK.
Key consideration: Dave Lewis will want to look afresh at the components of value and loyalty for shoppers at Tesco, identify where beyond price he needs to focus to bring out relevant value for Tesco shoppers, to get shoppers choosing to visit Tesco more often. He’ll want to do this across large formats, convenience stores and online, and through Clubcard.
Challenge 2. Making shoppers love Tesco
This was a core element of Philip Clarke’s “Building a better Tesco” plan. And there has been undoubted progress here, as Tesco has developed more enticing store formats and made service and staff one of the key elements in the plan, Tesco, too, has been been making strides with its online identity, becoming softer and friendlier. But Unilever boasts impressive strengths in nurturing and growing brands, not least in how it has achieved tremendous success with Dove and also how it has begun to make more of its core corporate brand to show relevance to consumers. Key consideration: Dave Lewis will no doubt have many thoughts on how to achieve this, but with a wealth of brand knowledge gained across the globe, his brand building credentials will be an important skill he brings to the Tesco offer. He will need to quickly assess which of Tesco’s brand attributes work well with shoppers and which need developing.
Challenge 3. The right format strategy
Tesco’s strategy on store formats has changed significantly in Clarke’s time at the top. The shift of new space from larger stores, the Tesco Extra and Superstore format, has been replaced with a focus on convenient Tesco Express stores, playing to the trend of frequent, local shopping. This commitment was emphasised just a few days ago with the announcement that 4,000 new homes are to be built on now unuseable sites in Tesco ownership. We can expect little change in this strategy under the Lewis reign.
In terms of existing stores, Tesco has led in recent years on trying to redefine the large store proposition in an attempt to address declining sales as shoppers change their habits. The refit last year at Watford Extra store saw Clarke’s vision realised, refocusing the store on fresh food and creating shops within a shop to make the store more manageable and inspirational to shoppers. The concepts seems to have been a great success; unsurprising given Clarke’s strength has always been his connection with his roots on the shop floor; with the successful initiatives, including the incorporation of food services like Giraffe and Harris & Hoole, being rolled out in an aggressive UK store investment plan.
Key consideration: The new look Tesco store and redirection of its new space strategy will be one of Clarke’s lasting impacts, and while Lewis will undoubtedly have his own vision, this is an area of the business that looks to be on the right path and that Lewis will look to enhance rather than fundamentally change.
Challenge 4. Providing shoppers with the best shopping trip in the market.
Perhaps the most important but most challenging elements of leading a retail business is ensuring all elements of the shopping trip is customer focused and delivered consistently across its many touch points so that shoppers choose to return. While again the emphasis has been there for Clarke and huge investment has been made in more store staff and training, this is an area that could use a fresh perspective.
Key considerations: Lewis will know that a key part of making shoppers love Tesco is through the staff that serve its customers, and this is where his focus is sure to begin from day 1; his colleagues in store.
Challenge 5: Building on online and digital strengths
Clarke has always been an advocate of technology and has never let-up on speaking about his vision for a digitally connected and seamless Tesco. Indeed he inherited a business that was in a position of clear market leadership for online grocery shopping, and through out his time at the top has got behind the expansion of grocery click and collect hubs in car parks and recently away from stores at railway stations, as well as Tesco Direct non food collection points in stores.Tesco has also prioritised becoming a global leader, rolling out online shopping to all its key markets. This gives a strong international platform from which to build. Key considerations: Lewis will be keen to maintain this position, recognising Tesco’s vast property estate and mature operation in the online market will be key to winning in an increasingly competitive market.
Challenge 6: Being more locally relevant than ever in a global market
Like Philip Clarke, Dave Lewis will bring significant experience and an international perspective to Tesco, having worked across Europe, South America and Asia in his many years at Unilever. Clarke has made some tough, and at times quite controversial calls in his time to reposition Tesco’s international business, exiting from unprofitable operations in the US and China. Lewis’s supplier insights will add a fresh perspective, and provide a distinct and wider global perspective, over how to leverage the huge competitive advantage of a global brand on a local basis. He is also well prepped for creating winning organisational structures internally, as well as dealing with external macro factors such as political unrest and hyperinflation, something he successfully steered his way around for the Unilever business in Indonesia in the early 2000’s.
Key consideration: Having had Tesco as one of the most important of all his customers at Unilever, Lewis will know only too well the benefit of ensuring products on shelf are locally relevant for the shoppers that use a particular store, and cracking the balance of global sourcing with locally relevant ranges will be key. Indeed the local view of the Tesco brand overall will be a much tougher nut to crack, and perhaps Dave Lewis’s greatest challenge.
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