Tesco compares current and previous recessions at the IGD Convention

November 1, 2009

Sir Terry Leahy, chief executive at Tesco, compared the current and previous recessions, in which industry has not just survived but thrived, and said his message was “one of hope”.

Sir Terry said recessions share some things in common and following the customer remained key.

“[Another] focus of the organisation is on understanding what customers want in their lives and need today and mobilising the organisation to respond to that.”

Sir Terry said there was a need for constantly changing tactics and a flexible and motivated workforce. He also advised delegates take survivable risks. “Not taking risks is a sign of a moribund company,” he said.

Change also demands innovation, said Sir Terry. “Necessity really is the mother of invention,” he said, and he reminded delegates it cost less to enter new markets in recession.

After recession life returns but not usually as it was before and there is a “new normal”, he said.

Sir Terry said Tesco has tried to remain true to it origins as a market trader and he looked back to the early ‘90s when it launched its one in front queue policy, Express and Metro stores, Club Card and entered new markets.

This recession is no different, he said. Tesco has launched a new Club Card loyalty drive, a new tier of products and discount brands and new convenience formats around the world.

Sir Terry urged delegates not to lose sight of the long term trends including climate change, an aging population, growing markets in India and China, local sourcing, community, convenience and the environment. “Hopes and values have not changed because of recession,” he said.

On the topic of climate change, Sir Terry said customers were the untapped resource in the industry’s struggle to cut emissions.

“Customers want to go green but we need to make low carbon living desirable and give consumers more information about a product’s carbon footprint.”

Customers also want more information on healthy eating in their drive to look good and live forever, he said.

Sir Terry said Tesco has responded by offering 7,000 healthier lines, a discount range of health beauty products plus good offers on fresh produce.

“There’s good growth in getting people to feel good about themselves,” he said. Convenience across the world is gaining traction, he said.

"People's lives are becoming more hectic and they are willing to spend money to protect the time they have,” he said. “It’s a pain to shop around.”

Sir Terry said that is why Tesco is expanding its convenience formats around the world but it goes beyond shopping.

“Customers want all transactions to be simple, quick and easy.”

However, companies do run the risk of being seen as inconvenient and innovation is never an excuse for complexity, he said.

Driving efficiencies is also key, said Sir Terry. He reported Tesco has saved 52,000 deliveries to stores or 12m road miles last year and the £540m saved had been reinvested in the customer offer.

“Doing more for less applies to government too,” he added, recommending helping businesses create more jobs, innovate and invest was the right way, rather than burdening business of all size with more tax and regulation.

“Governments can best help by not distracting us from our core task to deliver to the customer,” he said.

Sir Terry expressed concern with the UK’s education system too. “Sadly, despite all the money that’s been spent, standards are woefully low in too many schools.”

Sir Terry said teachers were distracted from teaching in the classroom because the education system was too complicated and urged government to keep things simple because “less is more”.

Sir Terry said recession had reached its lowest ebb around the world and stability was returning.

“If we remain focused on those simple truths, our industry will get through,” he said and he reminded delegates the sector had helped to raise consumers’ standard of living. “We need to remember the real benefits retailers bring to peoples’ lives,” he said.

Sir Terry: hopeful