Time was when getting a new product listed simply had to overcome the ‘we don’t have rubber-shelves’ barrier, allowing us to put forward a magnanimous offer to cull one of our current lines that was patently well past sell-by…
The key difference now is that the shelf is also being ‘shortened’…by up to 30%, to be precise…
This puts us in a whole new ball-park, given that one part of Tesco (via a third party) is busy finding ways of eliminating current lines/categories, seemingly without buyer intervention, whilst the buying team are presumably attempting to operate in a ‘business as usual’ environment…?
This 30% cull certainly represents the end of token ‘innovation’, often a disguised ‘me-too’ aimed at securing an additional facing, and allowing a new spin on an old story. In other words, a new product now needs to represent a spectacular leap forward, in order to make a real difference. Moreover, given that the emphasis in Tesco will be on front margin, the usual trade investment package will carry less weight.
This means that the product will probably have to succeed elsewhere, i.e. via one of the other multiples, proving that it deserves a place in the market, in order to enhance its Tesco-appeal, but at the same time denying our No. 1 retailer the traditional innovator’s advantage…
Hopefully, these mental gymnastics will help NAMs to think fundamentally about the meeting of real consumer need, better than available competition, and allow them to refine a bespoke trade package that really stands out in the marketplace, and proves it in practice…
In terms of making space for real innovation, and given Dave Lewis marketing background, and an outside agency, Boston Consulting Group working to a brief, the starting point has to be the needs of the consumer-shopper. Possible candidates for culling have to include:
- Obvious over-laps by function, and undifferentiated me-toos
- Products that are in the assortment because of back margin, rather than consumer demand
- Slow-yielding ‘experimental’ products outside the core Tesco offering
However, given the 30% culling target, it is unlikely that the above steps would generate sufficient numbers of discontinued SKUs, so it will probably be necessary to eliminate entire sub-categories to achieve the numbers…
In which case, candidates could include any sub-category that fails to reach Tesco’s 25% average Gross Margins and ideal Net Margins of 5%. Other criteria could include minimum space productivity levels of 1,000 sq. ft. per annum. Finally, as regular store checks of Tesco Extra will reveal, those sub-categories that have been progressively reduced over the past three years in terms of in-store presence, such as home entertainment software (CDs, DVDs, and games) and books, have to be due for re-assessment…
Also, if we add the idea of the long product tail in large space retail, accounting for insufficient sales levels, redundant space in-store arising from the onset of the ‘squeezed middle’, and reputed to be of the order of 20% of the selling area, any culling of assortment could generate additional redundancies in store space…
Private label – a special case?
Again, given the brand-marketing background of Dave Lewis, and the help of an agency tasked with meeting consumer-shopper need, profitably, we would suggest that Tesco’s private label will be granted no special privileges in the culling process. Accordingly, private label SKUs will have to fight their corner vs. established brands in order to justify their on-shelf facings…
Finally, given the presence of independent consultants, and the ‘non-involvement’ of buyers, NAMs will not be able to use the traditional supplier-buyer relationship to directly influence the process…
Accordingly, it will be necessary for NAMs to revert to the satisfaction of fundamental consumer demand within core Tesco traffic as a criterion for justifying their brand’s and new variants’ presence in the assortment. In practice, this means making an objective re-assessment of the appeal of their brand vs. alternatives available to the target consumer within the Tesco environment.
In addition, given Lewis’ shift in emphasis from Back to Front margin, it is vital to re-assess and re-engineer their trade offering in order to optimise the appeal of the total offering vs. available alternatives, as viewed through the new Tesco lens. Then find a way of getting the revised offering onto the Tesco table, before the cull shortlist is finalised…
In other words, an unprecedented set of assortment decisions is being made by Tesco using commercial logic based on demonstrable consumer demand and aimed at providing a simple choice for the consumer-shopper. Suppliers would be well advised to adopt a similar approach…
