TESCO VS WAL-MART

Tesco vs. Wal-Mart

Tesco vs. Wal-Mart

Introduction

When Wal-Mart entered the British market in 1999 by buying a chain of stores, many expected it to dominate. Instead, Wal-Mart's largest non-American operation has been struggling, and its top local rival is thriving. That rival is Tesco, Britain's largest retailer. Its big weapon is information about its customers. Tesco has signed up 12 million Britons for its Clubcard program, giving cardholders discounts in exchange for their name, address and other personal information.

Discussion

The data let Tesco tailor promotions to individual shoppers and figure out quickly how new initiatives are working. The Clubcard has helped boost Tesco's market share in groceries to 31%, nearly double the 16% held by Wal-Mart's Asda chain. Tesco's computers often turn up counterintuitive results. Shoppers who buy diapers for the first time at a Tesco store can expect to receive coupons by mail for baby wipes, toys - and beer. Tesco's analysis showed that new fathers tend to buy more beer because they are home with the baby and can't go to the pub. Tesco has used its knowledge of shoppers to fight Wal-Mart's core appeal - low prices. After Wal-Mart bought Asda, Tesco searched its database and singled out shoppers who buy the cheapest available item. They were most likely to be tempted by Asda, Tesco figured. Tesco then identified 300 items that these price-sensitive shoppers bought regularly. Tesco lowered prices, and shoppers didn't defect to Asda. As Wal-Mart is increasingly doing in the US, Tesco tries to appeal to both affluent and bargain shoppers. It has several private labels, ranging from the Tesco Finest line that includes duck pate and cashmere sweaters to the Tesco Value brand, which offers baked beans and the like. About 80% of Tesco shoppers are Clubcard members. They join by filling out an application form at a store, which includes optional questions about the size of their household, the ages of their children and dietary preferences. Members receive a plastic card in the mail, which they use at the checkout to receive a point for every pound they spend. They must spend at least £150, about $280, to begin getting points. Each point is a penny off future purchases, or it can be converted into miles in frequent-flier programs. On top of the points, big spenders get discount coupons every three months on particular products, keyed to their buying profile in Tesco's database. Each product is scored on 50 dimensions such as price and the size of the package. The computer looks for customers whose shopping baskets have similar combinations of scores. Many retailers consider loyalty programs expensive to manage and think they slow down the checkout line. Neither Wal-Mart nor its Asda unit has a frequent-shopper card, though Asda tried one for four years before dropping it in early 1999. Asda argues that it can get nearly the same information for less money by combining Wal-Mart's powerful sales-tracking computers with targeted market research such as focus ...