Tesco Direct closure highlights wider retail problems
Retail and commercial expert Kate Hardcastle warns retailers against being a ‘bland brand’.
Her comments come in the wake of Tesco’s announcement that it will be closing its non-food website Tesco Direct, putting 500 jobs at risk.
The retailer confirmed yesterday that the website, which sells non-food items such as clothing and homeware, was making a loss and had "no route to profitability".
“You cannot sit in the middle market of retail anymore,” Hardcastle told BusinessCloud.
“You have to be either very clear on a very aggressive price strategy or you need something different – new products, innovation, something exciting that entices the customer with knowledge or service or in another way. You cannot just be a bland brand.”
Hardcastle is a consultant advising household names to help them reach more customers, transform the customer experience and become more successful.
She believes that the move is a strategic one on the part of Tesco that reflects the current state of the sector.
“Every time one of these retail announcements are made it’s very sad for the people involved but it’s a very real indicative situation of where retail is,” she said.
“I think the Tesco Direct news is very interesting because it highlights that it’s not just a traditional bricks and mortar issue, it goes so much wider than that.
“Tesco Direct has to compete with the likes of Amazon who is a fierce organisation. Anything that they would try and do in terms of better delivery times or prices are going to be met by an array of different operators online.
“At a time where grocers are being completely held to ransom by the likes of Aldi and Lidl you have to make decisions to focus on certain areas of your businesses and I really believe that’s what this is - Tesco is focussing back on what it’s good at.”
The competition for non-food retailers online is incredibly tough says Hardcastle, and she believes that Tesco has struggled to keep up with the competition.
As a result, the Tesco Direct website, along with its distribution centre near Milton Keynes, will close on 9 July. Tesco said it would support staff affected by the changes.
“On that model you have to be selling branded goods, so you can forget price comparison which means margins are incredibly tight, and this is a grocer that over the past two years have been knocked off,” she said.
“In the past, one in seven pounds were spent at Tesco. That’s a big fall when Aldi and Lidl have come in and shaken that tree and then you’ve got all the big supermarkets are trying to eat the same pie.”