The Carnage Report, for those who like marketing, tech and culture covered without pity or favour

Monday, April 15, 2013

(Business) Tesco: dark moons in the west, silver linings in the east?

It hasn’t been the best of times for Tesco in recent months as its US venture Fresh & Easy has fallen flat to the point that the Retail giant is considering cutting their losses by either selling up to its immediate competitors or effectively “break-up…the business”[1]. The sell-off has already started with Tesco selling “Fresh & Easy refrigeration units” and looking for buyers for “220 East Coast stores and a distribution centre (which) could be attractive to property developers”[2].

However Tesco’s woes in the US bear no comparison to their fate of late in their bread and butter domestic market. The horsemeat scandal which Gripped Britain last month outraged consumer and the public in general with Tesco taking front and centre for most of the flak.

The PR nightmare began when Tesco, to their embarrassment, had to pull a number of their own brand meat products as they were found to have traces of horsemeat[3]. Tesco took the biggest hit in the aftermath of the scandal as it saw its market share take a tumble as it fell “below 30%-a level it fell below eight year ago…”[4]. Its rivals saw a boost in sales with Sainsbury’s, unblemished by the horsemeat debacle, were the chief beneficiaries of Tesco’s misfortune reporting a notable increase in sales[5].

However Tesco’s domestic troubles have been in the making long before the horsemeat scandal stole headlines as Tesco profits in the UK, while substantial, experienced a drop and have been outperformed by other markets, notably by the retail giants’ Asia and banking operations[6].

Seeing that Tesco may have reached its highest rate of profit in the UK, its leadership looks to continue its impressive growth in Asia by expanding its already impressive online operation to cover its rapidly growing Asian demand with the company being able to “launch in 50 cities across China” however, the retailer remains cautious[7]. Subject to an successful dry run in Shanghai, Tesco may expand its operation in China as it tries to negotiate the niggling act that China is still largely a cash economy[8].

In sum, Tesco have not had the best of times in the last few months but with plans to expand their operations in Asia in the near future, it could make for a fruitful future.