Omnichannel Retail Is Driving A Strategy Change At Tesco

A changing landscape is forcing the retail giant's hand


The last year has not been kind to Tesco. In April of 2015, the retail giant reported a staggering £6.4billion loss, having overestimated the amount of money it would receive from suppliers. And things have not got better since. This January, City experts were predicting that investigations into the accounting irregularities could see Tesco fined as much as £500million, while they have also seen discount retailers like Aldi and Lidl eat into their market share.

One of the most important trends in retail that supermarkets must navigate is omnichannel, as peoples’ shopping habits increasingly move online. It is with this in mind that Tesco has made the decision to end 24-hour shopping at 76 of its stores - just under a fifth of the 400 Tesco stores that are currently open 24 hours a day. The outlets affected will now open only between 6am and midnight, and 400 staff will be ‘affected’.

Tesco blamed reduced late-night demand and a rise in internet shopping for the move. According to a spokesman from the supermarket chain, ‘As more and more consumers use online services to streamline their lives, it is essential retailers provide a multi-channel offer that meets the demands of modern customers, who easily switch channels to get something done. After all, consumers respect and return to brands that make their busy lives easier, fitting in rather than adding on.’

By closing at night, Tesco hopes it will be able to improve the overall shopping experience by addressing stock levels and making changes overnight. It is a prime example of how established retail practices are being adapted in the face of online growth and changes to consumer shopping habits. Tesco’s decision is a good one. It is unlikely to lose much ground to the other supermarkets as a result of the decision, with Asda the only other UK chain with 24 hour stores, and it follows a growing trend in retail that better suits the modern consumer. According to research by PricewaterhouseCoopers (PwC), 71% of retail and consumer goods CEOs named omnichannel fulfillment as a top or high priority.

Grocery has long been the least mature omnichannel segment, with PwC giving it a ranking in their index of just 31, but this is changing. PwC put the slow development of this category down to its relative unattractiveness to customers, arguing that most people would prefer to see and touch food before buying it. Supermarkets also face a unique challenge compared to other sectors in that the logistics of shipping perishable products like food are far more complex, as well as the cost of having numerous facilities located close to consumers. Omnichannel retail offers consumers more ways to shop and interact with a retailer, more information about products or categories of products that interest them, and greater product availability. For Tesco to prioritize it may not put an end to the company’s problems entirely, but it is a step down the right path.

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