Tesco: Testing IT

Mission: “to create value for customers to earn their lifetime loyalty.”

A company focused on their client and working to ensure their commitment, Tesco explored IT in order to facilitate client satisfaction and loyalty.  Their exploration and perseverance in the world of the internet through their investment in the NCR Teradata data warehouse and the Microsoft BackOffice, which allowed them to gain a competitive advantage.

The NCR Teradata system is a software that works in conjunction with different operating systems in order to warehouses data.  Tesco used it to get to know their customers and get a 360-view of them in order to better answer to their needs.

Tesco also gained an IT competitive advantage when it implemented a Microsoft BackOffice to allow for an online shopping service based out of their retail infrastructure.  Through their site, customers were able to purchase their food, books, electrical goods, videos, etc. for just an additional £5 delivery charge. Their back office allowed for customer customization, so that every time someone logged in they entered a “virtual storefront” and access their previous shopping list as well as the entire superstore and a help line.  From the online storefront, clients could compare prices with other major supermarkets, could check and use their club loyalty points as well as trade shares.  By 2001, Tesco was the “number one e-grocer on the Web” while competing supermarkets throughout Europe were either going bankrupt or being acquired.  Moreover, Tesco.com discovered a hidden market outside of their original target market of working or stay at home wives.  They began to reach out to people with sight and hearing problems. 

By 2001, Tesco.com was making money and controlled 55% of the e-grocer market share.  The problem, of course, was that their online income only represented 1.5% of their overall profit. Unable to rely on the UK market, Tesco invested in groceryworks.com in the USA, where they hoped to convert the Safeway system into a profitable one more like their own.  While Tesco had the first move advantage in the UK, the USA already had competitors with a loyal clientele like Fresh Direct (an online grocer without actual supermarkets). 

So, while Tesco HAD an IT competitive advantage between 1996 and 2001 that allowed them to move lock in a loyal customer base, I am not sure they enjoy that same advantage today. The technologies used are accessible to most companies. The question is, can they steal the Tesco customers?