22 Mar Wholesale success
Global Opportunity 2015 | TESCO
Tesco’s wholesale business may be in its infancy, but the retail giant’s experience in product development and supply chain capability means Tesco branded products are flying off the shelves in overseas supermarkets, says Matt Simister, Commercial Director, Fresh Food and Commodities, Tesco
Tesco is one of the biggest retail brands in the world with nearly 7,000 stores and franchises operating in 11 countries.The company has strong retail roots going back nearly 100 years when it was founded in 1919 by Jack Cohen as a group of market stalls in London’s East End.
By 1939 the business had grown to over 100 stores across the UK. Since the 1990s, Tesco has diversified from a grocery retailer into areas such as the retailing of books, clothing, electronics, furniture, toys, petrol and software, financial services, telecoms and internet services.
When the worldwide recession hit in 2008, like many multinational stores Tesco struggled to find new avenues for growth and had to scale back some of its international plans. Tesco is now working with local businesses to grow its wholesale business.
“Strategically we wanted to go into retail,” says Matt Simister, “as we feel we have a huge capability in terms of resources, supply chain, and product development that we can offer countries where we don’t need to invest in assets such as stores and distribution centres.”
Matt explains that excellent contacts and knowing your local market is key to success. “You need to be local in retailing, local customers, local colleagues and a local offer.
We send the Tesco brand to our international stores whenever they require it, so the whole portfolio is open to any of the stores to order, but they also develop their own products for local customers too. Wholesale, the whole Tesco portfolio is available to other retailers.”
Tesco currently sends private label products to 27 export markets overseas, and also has F&F franchises – Tesco’s hugely popular clothing range – in over 20 overseas markets. The company uses its history and infrastructure in retail brand development to get buy-in from local stores abroad.
“We have a lot of capability in our product development and in our technical resource. We insource from over 70 countries and have a very wide transport network and supply chain capability, and these are capabilities that not every retailer can afford. It is often easier for retailers to lean on our capabilities to offer the range to customers.”
Tesco has vast experience operating in a diverse range of markets. “We send our products wherever other retailers require them,” says Matt. “It’s where other retailers find offering our products gives them a competitive advantage, where they can offer a better range of quality products at good prices.”
Short term, Tesco is concentrating on turnaround at home in the UK. “We are growing our wholesale business; it is still immature because it is only in its third year,” explains Matt.
“In the longer term I see that it isn’t strategically necessary for Tesco to have assets in lots of different countries, but we have great products, so for us to provide them in different countries is a great strategic opportunity.”
Tapping into local markets is one of Tesco’s key areas of success. “Retailers are always looking for some competitive differentiation and advantage in their home markets,” observes Matt, “and often the partners we work with find they can sell a wide range of Tesco branded products and they are the only people to sell them in the market.
They offer their customers great quality and they can often pioneer into new markets themselves. For example Tesco Organic or Free From or special baby range products that are quite innovative in developed markets, but ahead of the curve in developing countries.”
The core range of Tesco’s wholesale goods is Tesco branded and reflects those seen in UK shops, including Tesco Finest brand, standard, and Tesco Value, as well as healthy eating and organics.
Wholesale customers are offered all of these brands, although not the option of white-labelling Tesco goods and rebranding them as their own.
“We haven’t chosen to go down that route,” says Matt. “We are looking increasingly at what we can do in food services which is less about the branding and more about the product itself. So we can offer increased diligence down our supply chains and core products at very good prices.
We have good synergies with our existing supply base, and we can get a business that works for both retail and food service. For instance, we can serve the straight cucumbers into retail stores and the wonky ones into restaurants.
It sounds quite simple but there are actually opportunities to work with the best suppliers in the world to take more of the crop, and then send the whole crop three different channels.”
Operating in overseas markets can have its problems. SMEs expanding overseas often experience difficulties with translation and taxation; however Tesco has managed to avoid these pitfalls.
“Typically our partners are already established in those markets markets where we plan to operate, but there is still a process of getting the product through to that customer,” explains Matt.
“There is a paperwork and supply chain process, but again it is something that we are quite familiar with our own businesses. Usually with the combination of a local partner and somebody that has experience of exporting products, we can get to a situation which is beneficial to all.
From the initial conversation to get a product up and running takes on average about three months, depending on specific circumstances.”
So what next for Tesco? At the moment the retailer’s priority is the UK market. Challenges in the domestic market have been well documented, with Tesco Chief Executive Dave Lewis admitting in April 2015 that “It had been a very difficult year for Tesco.”
“We must turn around our performance in the UK and that will be our primary objective,” admits Matt. “We are interested to talk to anybody from any territory.
The important thing for us is finding an opportunity that is going to work for both partners, a business that is established but also shares our values and standards: one that wants to embrace a win-win partnership.”
The ability to work well with partners is crucial to this success, believes Matt.
“It’s really important to work with partners to get the message across, and to make sure it’s really clear about what service we can offer and where we can help develop. We will work with all the partners available to try and get the best out of everyone’s capability.”