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Tesco’s Downfall Is a Warning to Data-Driven Retailers | Harvard Business Review

What the heck happened to Tesco?

Many analysts and unhappy investors point to Tesco’s ill-fated Fresh & Easy convenience store foray in America just as the global financial crisis kicked in. The failed expansion effort ultimately led to write-downs topping $3 billion. At the same time, dramatically increased price competition by discounters such as Aldi severely undercut Tesco’s “every little helps” value proposition. The company still declines to say whether its systemic supplier-related accounting misstatements better reflect malpractice or malfeasance. Regardless, Tesco’s collective failures feel operational, organizational and cultural. This isn’t simply bad luck.

But beyond the business cliches of “big bets gone bad” and “not keeping one’s eye on the ball” is the disconcerting fact that the core competencies that made Tesco a marketing juggernaut and analytics icon appear almost irrelevant to its unhappy narrative of erosion and decay. More than any other retailer of scale, Tesco had committed to customer research, analytics, and loyalty as its marketing and operational edge. For example, the supermarket ingeniously succeeded at Internet-enabled grocery shopping in ways that Webvan—remember them?—could not. Tesco was digital before digital was cool. Tesco’s Clubcard loyalty program was launched under Leahy in 1995 and redefined both the company and the industry. As the Telegraph recently observed, “Tesco was transformed into the market leader in the UK—with more than 30pc market share—by being able to respond to the demands of its customers.”

American supermarkets—notably Kroger—admired and sought to emulate Tesco’s success. Even Walmart—overwhelmingly focused on optimizing its everyday low-pricing supply chain logistics—took Tesco’s command of customer analytics seriously. Practically every retail Big Data and analytics case study over the past decade explicitly referenced Tesco as “best practice.” With the notable exception of, say, an Amazon, no global store chain was thought to have demonstrably keener data-driven insight into customer loyalty and behavior.

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Tesco’s Downfall Is a Warning to Data-Driven Retailers.

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