In the business world there are countless stories that prove even giants can stumble. This week, we have another case in point: the world’s second largest retailer, Tesco, has started to show significant cracks in its empire.
Tesco’s quarterly data this week revealed a widening sales decline, making it the worst performing supermarket in the UK. Moreover, it is mired in scandal via its admission that it had overstated profits by £250M. Consequently, the share price has plummeted, wiping more than half of the company’s market value in the last 12 months.
Why the sales decline? Tesco took its eyes off the ball of its core business as it focused on international expansion. While trying to grow abroad, it cut jobs and decreased in-store investment in the UK just as its rivals, looming in the wings, were doing just the opposite. Add to that, consistent price pressures from discount retailers such as global-chain Aldi, European-chain Lidl and Walmart’s British chain, Asda, whose profits are all showing incremental gains.
Is there a moral in Tesco’s story? Five cautionary lessons Tesco should consider as we follow the next few chapters of this story:
The 21st Century continues to show us that no brand is too big to fail, or at least stumble, however dominant its market position, whatever its sector. It remains to be seen whether “Every Little Helps” can indeed be the saving grace for Tesco.