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Friday, June 4, 1999 Published at 14:54 GMT 15:54 UK


Business: The Company File

Stores at war: winning secrets

Sainsbury is feeling the heat as Tesco soars ahead

As if Sainsbury's announcement of dismal profits and job-cutting were not enough, Tesco has now confirmed its position as Britain's top supermarket by revealing more soaring sales figures and ambitious expansion plans.

For Sainsbury's, the timing - in the same week - could not have been worse.

So why have shoppers been abandoning the 1980s favourite Sainsbury and allowing the one-time dowdy-seeming Tesco to make a soaraway comeback?

What has Tesco done right that Sainsbury hasn't?

Store numbers

In the UK Tesco has more outlets - 586 compared with Sainsbury's 400.


[ image:  ]
Abroad, Tesco has 108 stores - 16 in the Far East, including Thailand and South Korea, and the rest in Europe, including Hungary, Poland and the Czech Republic. It is also considering expansion into Taiwan and Malaysia.

There is only one Sainsbury store abroad - an off-licence in Calais - but the company has 121 Shaw's stores in the USA.

In 1994, Tesco beat Sainsbury's to buy supermarket chain William Low - giving it an important presence in Scotland.

In 1995, Tesco overtook Sainsbury's as Britain's biggest food retailer. A host of initiatives were responsible.

High street presence

Soon after the sudden mushrooming of out-ot-town superstores, Tesco realised the value of keeping a high street presence. Today it has 41 Metro stores in prime spots in the centre of towns and cities.

For years, Sainsbury ignored the trend back towards convenience, but last year caved in and decided to set up "Local" shops. There are still only two.

In store

Then there was the 'Clubcard', Tesco's loyalty card that earns customers reward points every time they shop.

Lord Sainsbury famously dismissed it as "electronic version of Greenshield Stamps".

He lived to regret that comment. Sainsbury was forced to make an embarrassing U-turn and introduce its own loyalty card when the Clubcard took off.


[ image: Shoppers have voted with their trolleys]
Shoppers have voted with their trolleys
Next, Tesco's range of own-label economy lines gave shoppers the chance to save money on basics.

The group also pushes non-food sales, including clothes and home entertainment.

No items are out of bounds, it seems. At one stage, it offered some of the cheapest PCs - with the added incentive of earning Clubcard points on a major purchase. Most recently, it has been selling mopeds.

Then, Tesco took on designer brands such as Levi's and Nike, offering their products at cut prices. Even England and Scotland football shirts went cheap.

And Tesco was first to react to customers' frustration at long check-out queues, initiating a "one-in-front" policy - if there was more than one customer in front, they would open another check-out. The policy is still in place.

Tesco also removed sweets from check-outs, pleasing parents bullied by their sweet-tooth children.

It all gave shoppers the impression that Tesco chiefs had their interests at heart.

Diversifying

As supermarkets strode into the personal finance sector, Tesco was the first supermarket to offer personal pension schemes, aimed at people unfamiliar with buying any financial products.

New technology

No prizes for guessing which supermarket was first to become an Internet Service Provider. TescoNet was a trusted brand name.

Tesco was also the first supermarket to sell PCs with Intel's Pentium III processor.

It is also expanding Internet shopping services while Sainsbury's has just reduced its online stores.

Sainsbury, however, is aiming to be first with a warehouse delivering goods directly to online customers.

24-hour shopping

Tesco has more than 100 stores open round the clock. Sainsbury has 30.

Prices

Tesco has repeatedly captured more headlines by firing more shots in the price wars. The cuts have cost it more than £1m in total. Earlier this year, it announced it was reducing the price of more than 300 goods.

Sainsbury said it would "probably" match the cuts and boasted of having price guarantees on key lines.

Advertising

Sainsbury famously ditched probably the best-known advertising slogan in retailing: "Good food costs less at Sainsbury's".

The company then tried out a variety of slogans, ranging from "Everyone's favourite ingredient" to "Fresh food, fresh ideas" and "Value to shout about".

But the television campaign for the latest slogan - featuring John Cleese - flopped badly.

The commercial, which showed him bellowing at staff through a megaphone, brought protests from workers - and customers - that it was patronising.

The campaign was voted most irritating advertising of the year in a Marketing magazine poll.

Tesco, on the other hand, stayed faithful to one slogan - "Every little helps" - for six years.

And its adverts featuring Prunella Scales - also of Fawlty Towers fame - have gone down relatively well, appealing to a mass middle class market.


[ image: Tesco has offered customers more products]
Tesco has offered customers more products
Mike Pearce, chairman of marketing agency TSM, summed it up: "Tesco has done to Sainsbury's what New Labour did to the Tories. It has hijacked its ideas, added some value and stolen the hearts of Middle England."

Tesco spokesman Russell Craig said: "We're responding to what customers want from us. We have customer panels to give them the chance to tell us what they like and don't like," he said.

Sainsbury is trying to fight back. It is ditching its orange logo and brown staff uniforms. It is also aiming to become leaner and refine its decision-making process after admitting it got certain priorities wrong.

A spokesman said: "Our new identity will be a new culture because in the past we were seen as very bureaucratic with too many levels of management, taking too long to make business decisions. Under the new structure, some managers will work more in store and be more receptive to customers.

"Tesco had the facility to listen more than us. We were 18 months behind in launching our Reward card, which opens the door to a massive amount of market research.

"We were slow to listen to customers but we're taking steps to put that right."

Sainsbury's knows: Every little helps.



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