Tesco 2009 Annual Report Download - page 11

9
REPORT OF THE DIRECTORS
Tesco PLC Annual Report and Financial Statements 2009
Across our markets customers are changing their shopping habits as
they are affected to varying degrees by the global economic downturn.
In this kind of environment, it is more important than ever to listen to
customers and adapt quickly to their changing needs.
Each of our markets is different so it’s up to the individual businesses to
adjust their offer locally. Using customer insight allows our experienced
teams on the ground to make decisions based on real customer data.
We have spent many years developing our customer insight skills,
particularly through dunnhumby, the consumer research company
behind our loyalty scheme, Clubcard. Through careful analysis of sales
and loyalty card data we can better understand what is important to
our customers. This year we have been using this unique insight across
most parts of our business so we don’t have to guess what our
customers want, we know.
In all our markets it’s helping us select the most important items for
price-sensitive or cost-conscious shoppers so we can invest in lowering
prices on the most important items to help customers through tough
economic times. For example, in Malaysia, we have reviewed our
range of staple foods and groceries and as a result we have introduced
27 new products to the basket, which we know are among the most
important for customers. We now make sure that we are not beaten
on price for these products.
This insight is also helping us to make things simpler for customers to
shop in our stores. For example, in Asia we have worked with our leading
supplier of baby milk. By reviewing the sales data we discovered that
displaying the products by brand rather than by age was important so
we are changing the layout on the shelves to make it easier for customers
to find the products they want.
Whilst it is important to invest in the shopping trip we are also
continuing to invest for future growth. This is a strategy that has served
us well in the past; for example we entered Thailand and South Korea
during the Asian economic crisis in the 1990s and emerged stronger
once the economies started to recover. We are now market leader in
Thailand and following our acquisition of 36 hypermarkets in South
Korea we are now in a very strong position to challenge for market
leadership there as well.
We also announced our entry into the Indian market last year. We are
establishing a cash & carry business that will offer a comprehensive range
of great value fresh food, grocery and non-food products to small
retailers, restaurants, kirana stores and other business owners. We will
also provide farmers and other suppliers with a highly efficient route to
market. In addition, we have signed an exclusive franchise agreement
with Trent, the retail arm of the Tata Group. Trent currently operates four
Star Bazaar hypermarkets, with plans to grow to 50 stores over the next
five years. We will supply these hypermarkets with products, but also
offer our retail expertise and technical capability to support the
development of their business.
The overall performance of our international businesses during the year
has been strong, particularly against the background of increasingly
challenging trading conditions in all of our markets as the effects of
the economic downturn on consumers have grown and spread around
the world.
We have delivered very good sales and profit growth and our investment
returns have held up well. Importantly, we have grown share in all of our
markets and in some countries we have made more rapid progress this
year by sticking to our strategy as competitors falter. By continuing to focus
on doing the right things for customers – lowering prices, introducing more
affordable products, offering even stronger promotions – they have
rewarded us with good sales and market share growth. By keeping our
costs low and pushing on with expansion, we aim to take the opportunity
to strengthen further our market positions during the recession.
International
It’s been another good year for our international business which
now spans 13 countries across Asia, Europe and the United States.
As customers around the world are feeling the effects of the global
economic slowdown we are successfully adjusting our offer in all
our markets to help customers who are feeling the pinch.
Loyalty card schemes
We have national loyalty card schemes based on Clubcard in
Ireland, Malaysia, South Korea and China and pilot schemes
in Slovakia, Poland, Thailand and Turkey.