I was a bit disappointed to hear those words coming from the mouth of the CEO of Tesco.
For many years, Tesco symbolised retail excellence. Everything good about retail was attributed to Tesco. To now have the CEO of Tesco making excuses for Tesco poor performance is disheartening.
At one point Tesco was the second most profitable retailer in the world, the fourth biggest retailer in the world and the fourth most profitable business in the UK.
There was a point at which every twelve pounds spent in the UK, one pound went to Tesco.
Every time I conducted retail training, I used Tesco as an example of a good retailer. I have worked with Tesco myself, I knew Tesco had a lot of improvement to make in certain areas of it operations.
However, overall Tesco was the best of its lots.
Tesco had the best trained managers in the entire retail industry and it was the only retailer in the entire world that sat profit as it benchmark for performance.
So for the Chief Executive Officer of Tesco to now be giving excuses and blaming circumstance beyond his control over is sad.
The most shocking thing he said that I thought to myself if their guy was a football manage they will be throwing him under the bus tomorrow morning was: "follow the customer and the margins will be what they will be"
In order words, Tesco benchmark of 5.2% profit margin that made Tesco one of the most profitable retailers in the world is gone with the wind.
There are two reasons why Tesco CEO statement is relevant to the entire concept of increasing your store sales.
The first is the three reasons he gave for Tesco drop in profit:
Let's start with his first excuse the economy.
Throughout the 2008 recession, while thousands of retail shops were going bust and many high streets were on the brink of being collapse, the luxury retail market was still booming.
Even in Portugal, Spain and Greece where the entire country was going belly up, the luxury retail market was not just stable, it was even striving.
So how did the luxury retail market managed to remain buoyant?
The explanation many failed or struggling retailers will give for that is: despite the Economic situation, the rich will remain rich.
You see, that's a political statement.
It does not answer the question of why certain luxury retailer strive and some faltered.
The reason the luxury retail market continued to strive while the rest of the industry was in trouble is this: the luxury retail category understand their customers better than the rest of the industry.
This bring us to the first lesson I would like you to learn from this report, a lesson I am going to be hammering throughout this report.
The lesson is this: the 21st century consumer do not go into a retail store to buy the crappy made in China merchandise.
No that's not why they go to your store or that of your competitors. They go to your store to buy the experience of buying the merchandise.
So what they are paying for is the experience not the product.
The luxury market understands this about their customers so they continue to provide that experience recession or not. Mr. Clarke mentioned high end retailer like Waitrose stealing Tesco customers.
He does not really believe that those who buy from Waitrose are daft enough to believe that Waitrose products are more healthy that those of Tesco or Sainsbury?
They all know it's the same stuff.
But what those guys are buying from Waitrose is not the product but the feeling of buy from Waitrose.
There is a different feeling of walking around with a Waitrose shopping bag than walking with a Tesco one.
It is that feeling they are prepared to pay twice the price for at Waitrose.
What Mr. Clarke needs to be thinking about is how to trigger that feeling in his own customers.
Recession be damn, if you are able to capture the essence of why people buy, it does not matter the economic condition you will still be able to get them to buy from you.
Remember, people don't buy your product they buy the experience of buying the product.
That is retailing 101.
He spoke about competition.
Gee…that's like news to me a retailer having competitors, that's the first time in retail history.
When his predecessor Sir Terry Leahy was CEO of Tesco, Aldi and Lidl were in existence yet Tesco was the second most profitable retailers in the world.
Aldi and Lidl did not prevent him from making Tesco great. There will always be competition in retail, it comes with the territory.
To think that the reason Tesco customers are shifting to Aldi and Lidl is because of the price is simply a very naïve retailer explanation.
Every retailer have their target market and those people are fiercely loyal to certain brands.
But their loyalty is condition upon the brand continuing to provide them what attracted them to the brand in the first instant.
In his book 'The One Thing You Need To Know' author Marcus Buckingham said when he interviewed Sir Terry Leahy and asked him how he transformed Tesco into a global retail power house.
He responded that when he took over Tesco, he asked himself: 'who do we serve'? When he got the answer he proceeded to put in place mechanism for making sure they appeal to those types of people.
The problem Philip Clarke has is he has not asked himself the question: what are the changing buying behaviour of Tesco customers and target market.
The question Sir Terry asked was appropriate for the time. Today we live in a new retail environment.
Consumers wants something very different from what they wanted twenty years ago.
He failed to ask the question, Aldi and Lidl asked the question got the answer from Tesco customers therefore was able to poach them.
In case he is curious as the reason Aldi and Lidl were able to poach Tesco customers, lets me provide him a free consultation.
I have beaten on him enough, the least I can do is give him something to ease his pain.
People buy cheap but quality products from Aldi and Lidl.
If it was only a matter of price, shoppers would have gone to 99p or the pound shops.
Shoppers are not leaving Tesco for Aldi and Lidl simply because those retailers are cheap, they go to those stores because they sell cheap products made in Germany.
It is the made in Germany they are paying for. It's like Mercedes and BMW.
All through the recession there was never a time when Mercedes or BMW were in trouble.
People buy Mercedes and BMW simple because they are made in Germany because made in Germany represents quality.
That's exactly what Aldi and Lidl are using to get one over other low price retailers.
They sell cheap quality products from Germany.
This might sound like a contradiction of what I had already said that people do not buy products but the experience of buying the product.
Aldi and Lidl customers are buying made in Germany not the product itself.
Finally he spoke about the internet. I mentioned that NEXT surpassed Marks &
Spencer in term of profit because of its home directory and online division.
So the internet is not as bad as Mr. Clarke and other struggling retailers will like to portray it.
It is a fact that the internet has changed consumer buying behaviour.
Notwithstanding, the High Streets are still parked every weekend with millions of people going to shopping.
The question is not whether people will shop, the question is which store will they shop in: yours or your competitors'?
My goal in this report and in my 'How to Increase Retail Sales' home study course is to help you make your store the shoppers choice.