"Analysts say that Tesco's big advantage over major international rivals, which also include Germany's Aldi and Lidl, is its unrivaled ability to manage vast reams of data and translate that knowledge into sales. While data crunching may sound dull, it has given Tesco two major advantages: an unmatched ability to operate multiple retail formats—ranging in size from convenience stores to hypermarkets—and the market knowledge to offer what many analysts say is the best and broadest range of house brands from any retailer.
Tesco uses information gleaned from Dunnhumby, a British data mining firm of which it has majority control, to manage every aspect of its business, from creating new shop formats to arranging store layouts to developing private-label products and targeted sales promotions. In 2003, U.S. supermarket chain Kroger (KR) copied Tesco's example, setting up a joint venture with Dunnhumby in the U.S. Since then, Dunnhumby also has signed deals with a number of other U.S. retailers including Home Depot (HD), Best Buy (BBY), and Macy's (M).
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Tesco's other strength is its private-label goods. While U.S. retailers have struggled to convince shoppers that supermarket brands are as good as big-name counterparts, Tesco's private-label products account for as much as 60% of sales in many countries. According to the company, private-label products also account for more than 70% of Fresh & Easy's sales. "Wal-Mart and France's Carrefour are lucky to get 35% of sales from private label," Flickinger says. The reason, he says, is that Tesco has a range of house brands to cover every price point. In fact, some of its premium-range products, such as Tesco Finest chocolate or yogurt, even sell at up to a 50% premium to established brands such as Cadbury (CBY) and Danone (DANO.PA).
. . . Tesco has come a long way from its humble beginnings in 1919 at a market stall in London's East End. Today, it runs the world's largest and most successful online grocery operation and is Britain's biggest private-sector employer, with 280,000 staff. Its broad portfolio of businesses in Britain also encompasses telecom services, gas stations, personal finance, an online digital music and film download business, and even a home insulation service.
Tesco reckons there's plenty of potential for some of these businesses, especially personal finance, which it hopes to launch into new markets such as Poland.
Meanwhile . . . in NORFOLK, VA
The state's first Wal-Mart Neighborhood Market, a grocery concept focused on convenience and low prices, is scheduled to open Wednesday morning on East Little Creek Road.
The 45,000-square-foot store looks like a traditional supermarket - more akin to local rivals Harris Teeter and Farm Fresh than its sister Wal-Mart Supercenter. About one-fifth the size of a Supercenter, the Neighborhood Market abandons the open, brightly lit, warehouse feel and straight aisles of a Supercenter in favor of cozy specialty areas with track lighting and curved walls for produce, meats and deli.