Tesco 2012 Annual Report Download - page 30

With our established private label programme, we produce great
quality Tesco brands at a range of price points, from Everyday Value up
to Finest. Our product brands also have established market positions.
For example, F&F, which is the market leader in clothing in the Czech
Republic, Slovakia and Hungary, is itself diversified into distinct sub-
brands for different clothing styles.
In services, we often work with specialist partners to source the best
product offerings. For example, we created a joint venture between
Vodafone and Tesco Hungary this year, and Tesco Bank insurance
underwriting is primarily provided in partnership with Ageas
Insurance Limited.
Move:
The right products at the right time
Our network of distribution centres (‘DCs’) and advanced technology
support a modern, efficient and cost-effective supply chain.
An efficient distribution system starts with understanding which
products our stores need. We do this in two ways. First, we forecast
what customers will buy, using sophisticated, detailed models to
consider variables such as seasonality, weather forecasts and likely
response to promotions. Second, our ordering systems automatically
update in real time based on what customers do actually buy, so that
we can quickly and accurately supply stores with the right products
at the right time.
We plan our distribution processes, systems and network of DCs to
maximise efficiency. Labour scheduling and transport planning systems
enable our pickers and drivers to operate highly effectively, and we
develop our distribution networks to minimise the mileage needed to
get products to store in perfect condition. We also use transport other
than lorries such as our four train services in the UK, which save 15,000
tonnes of CO2 per year.
Continually striving to make every part of the process productive,
through primary distribution, we use our network to pick products up
from some of our suppliers and transport them to our depots, which
can be more cost-effective than individual suppliers delivering to us.
We also use return journeys from stores to depots to pick up waste
materials which we sell for recycling.
Sell:
The best shopping trip
Whether in store, online or a combination of both, we pride ourselves on
delivering a great shopping trip for our customers, week in, week out.
One of Tesco’s Values is ‘No one tries harder for customers’, and this
can be seen in how we strive to improve the shopping trip. This represents
every element of the customer shopping experience, including price,
range, quality, availability and service. Our loyalty schemes are key to
the customer offering, thanking customers each time they shop at Tesco.
We take a multi-format approach to our store network, to be able to
meet our customers’ needs for different types of shopping trip, from
large Extra stores that offer a full range of food, general merchandise
and services, to Metro and Express convenience stores.
‘Selling’ refers to a broader and broader range of activities as we
develop our multi-channel offer. We launched a grocery home
shopping service in the UK in 1997. Since then, we have grown this
business to over £2 billion of annual sales, launched grocery home
shopping in South Korea, the Republic of Ireland and the Czech
Republic, and launched further online businesses, such as Direct,
Clothing and Entertainment. We are increasingly offering customers
the option of combining stores and online with Click & Collect, which
makes the most of our convenient store locations, giving customers
an easy way to pick up products ordered online.
We also offer a wide range of services to our customers. With opticians,
pharmacies and phone shops available in our larger stores, and Tesco
Bank products available to buy in store, over the phone or online, we
are deepening our customers’ relationship with Tesco, bringing our
values of convenience, simplicity, reliability and great customer service
into what can be complex markets.
We don’t always sell our products ourselves. In South Korea and the
Czech Republic, we operate franchise chains alongside our own stores,
and we have also recently announced a new franchise model for our
F&F clothing brand in Saudi Arabia.
The virtuous volume circle
By keeping our customer focus central to our business model, we are
able to provide a leading customer offer: a broad range of products
and services at great prices, sold in shops in convenient locations and,
increasingly, available online. A great customer offer drives the virtuous
volume circle, which means that we can continuously improve our offer.
By selling more products, we are able to work with our suppliers to drive
mutually beneficial economies of scale, creating headroom to invest
and to offer lower prices to customers. An important element of our
Plan to improve business performance in the UK is centred on investing
in the shopping trip so that customers will reward us by buying more
from Tesco.
Enablers
Our core business model is supported by
enablers which maximise the potential
of our core activities to give our customers
the best shopping trip and ensure that our
activities are carried out in a sustainable way.
Leveraging Group skill and scale:
Making our business Better, Simpler, Cheaper, Faster
Sharing best practice systems, processes and approaches across all
of our markets takes our business model to the next level. By identifying
best practice in each market, we can improve our offering around
the Group. For example, some of the very popular brands we have
developed in Fresh & Easy in the US have recently been introduced
into the UK and South Korea. As our international experience grows,
we are increasingly benefitting from sharing best practice – with our
UK Operating Board all having spent some of their careers in our
international businesses.
Business model
26 Tesco PLC Annual Report and Financial Statements 2012