Where’s The Profit? By Alex Brownbridge
A firm you may visit today, your spouse may currently be inside picking up your dinner or where you may quite possibly work; reported a £3.5bn pre tax profit this week. Of course it is Tesco. Staggering considering we are supposedly heading for the dreaded double dip of economic growth, so what are they doing that other firms are not?
Well, although when you ponder Tesco as a company the UK comes to mind, Tesco in the previous 10 years has expanded like a global sponge soaking up competitors’ leakages in the US and primarily Asia. In fact, UK sales slipped 0.7% in the last quarter, blaming “high petrol prices on consumer’s discretionary spending in our stores” as one of the contributing factors, in a recent press release. In fact competitors, Morrisons, are currently offering 6p off every litre of petrol once you spend over £40 in store. It is true also that petrol prices have pushed up transportation and production costs, with the pressing temptation to increase goods’ prices to compensate.
Luckily for Tesco they are recently and more so every day, becoming a global phenomenon. Trading sales in Asia are up 30%, which accounts for two-thirds of their profits, not to mention increasing growth in the US; aggressively attacking Wallmart’s, owner of ASDA, previously commanding market share. CEO Phillip Clarke explains “All people are different,” and that sales abroad have flourished due to differentiated goods and services provided, noting the importance of micro management in specific regions is the key to success.
Contradictory to the recent strained UK success, or lack of, Tesco reported very healthy online sales from their “Tesco Direct” service. This 30% increase in sales is attributed to the ability to order it online and “pop into Tesco and pick it up” rather than waiting at home for it to be delivered a day or so later. It is this “extra thought” as well as giving customers products that change regularly depending on geographical position, changing tastes but most importantly providing what people want, when they want it and how they want it that has seen them generate profits to be proud of.
http://youreconomicforecast.blogspot.co.uk/ This is the man himself’s blog. Check it out, some really good stuff on there.