Tesco is successful chiefly because it understands Britain. But it is also changing the place

Via TheEconomist.com

IF AN anthropologist wanted to know what Britain was like, he would do well to take his notebook to Tesco. That's partly because it sells a third of Britain's groceries. But it is also because Tesco's customers are made up of the wealthy, middling and poor in just the same proportions as shoppers in the country as a whole (see chart). Tesco has become big by being like Britain.

At the beginning of the 1990s Tesco occupied a smaller, relatively downmarket slot. In a country where people still saw class in where others shopped, nice upper-middle-class mothers went to J. Sainsbury or Waitrose. Since then, Tesco has prospered by conquering the centre ground. The store that was once best known for being cheap now stocks expensive beef fillets in elaborately concocted sauces.

It has been a fabulously successful strategy. Tesco is the biggest retailer in Britain, where it employs more than 250,000. The third-largest retailer in the world, it made an underlying pre-tax profit of more than £2 billion ($3.5 billion) last year on sales of £37 billion. It is still growing at home, but is also expanding abroad, with investments in Poland, Thailand, South Korea, Ireland and Hungary. So what changed?


Part of the answer is Britain itself. As Britons became more middle-class, Tesco followed them upmarket. And it has made better use than its rivals of technology to find out exactly what they like.

Tesco is always hungry for new data: it recently called University College London's geography department to discuss new ways to slice up statistics. But most of its information comes from the Tesco Clubcard, a customer-loyalty scheme that allows Tesco to record what people are buying. Their 12m Clubcards are used regularly in Britain, many of them in the form of key fobs with a bar code on the back. Shoppers each buying 20 items a week would generate more than 12 billion pieces of data each year. Tesco can then explore links between purchases of different items—Turkey Twizzlers and claret, say—and market them in the store accordingly. “We believe we have one of the largest databases anywhere in the world,” says Martin Hayward of dunnhumby, the company that handles it for Tesco.

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