Tesco 2009 Annual Report Download - page 19

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17
REPORT OF THE DIRECTORS
Tesco PLC Annual Report and Financial Statements 2009
Non-food remains an important part of our strategy and we continue
to grow both sales and market share.
In our experience, customers will buy where they see value. To help
customers we have been making changes to our ranges and cutting
prices. For example, in the UK sales of our Technika own-brand
televisions have been very strong as customers trade away from big
brands and we now have a 10% share of the television market. We’ve
also been promoting our slow cooking appliances as customers have
been buying cheaper cuts of meat and cooking from scratch – half of
all slow cookers bought in the run-up to Christmas were sold in Tesco.
Our online non-food business, Tesco Direct, continues to grow rapidly,
increasing sales by more than 50% in the year. The latest spring/
summer catalogue and website includes over 1,500 products that are
cheaper than they were last year. In the current year we also plan to
introduce an online clothing offer – making our fashionable, affordable
clothes easier to buy for many more customers.
To ensure that we offer the best possible prices for customers we buy
many products globally so that we benefit from our scale. We have an
international sourcing office based in Hong Kong which is responsible
for buying 100,000 non-food products for the Group. The international
sourcing operation has seen rapid growth in the last few years and now
sources 60% of our clothing in the UK and 40% of hardlines, including
electricals, homewares, entertainment, toys and books. In Europe it
provides over 25% of our hardlines and 85% of our clothing and we
have recently started to source products for Asia. In the last year our
international sourcing team shipped 72,000 containers from 54 ports.
We also have sourcing hubs in China, India, Sri Lanka, Bangladesh
and Turkey, with smaller offices in Thailand, Czech Republic and Italy.
We have invested in buying hubs where we have a critical mass of
suppliers and shipment volumes. It helps to be close to our suppliers
so that we can ensure great quality products, delivered from ethical
sources, on time and at the best price.
Where possible we try to source products direct from factories rather
than through agents or middlemen. This way we can ensure the lowest
possible cost price as well as making sure that our products are sourced
safely and fairly. We also manage to strip out more costs by consolidating
freight volumes. This gives us the best shipping and transportation rates,
which can be passed on to the customer in the form of lower prices.
Non-food
It’s been a challenging year for non-food as consumers around
the globe have been hit by the economic downturn and are cutting
back on non-essential purchases – but by keeping our prices low,
improving our offer in key categories like electricals and clothing and
giving customers more choice about how they shop, such as through
Tesco Direct – we have outperformed the market.
No. 5
Technika is the fifth largest
TV brand in the UK.
Gaming sales up
30%
Clothing sales in
Central Europe up
11%