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tesco turnaround…proving less is more?

Tesco have announced results which show the first period of growth for 3 years. As part of many costcutting approaches, delisting brands such as Carlsberg, the 4th most popular lager in the UK, was seen as a bold strategy when announced and ‘probably’ a mistake.
The Big 4 UK supermarkets have been competing with the German discounters Aldi & Lidl, as well as each other, for market share. Clearly to improve their offer to customers, Tesco have been looking at their German rivals to see what they can learn. Whilst Aldi is increasing its market share in the UK, to become the 6th largest supermarket, their business model shows just how big a disruptor they really are.

An average sized UK supermarket usually sells 30,000 products. Tesco, leading the hypermarket charge in the UK gave customers 90,000 items to choose from, with 126,000 on offer in Tesco Extra stores. Aldi sells 1,400 items…in total. They offer one choice per items they sell eg one bottle of tomato ketchup versus 28 in a standard Tesco; one air freshener from Aldi against the 226 choices available from Tesco. Aldi has developed its business model and has become so successful; it is now the 8th largest retailer in the world.

Tesco, clearly seeing possibilities in mirroring some of the same propositions as Aldi, have decided to reduce the number of items they sell by 30%. Choices in some areas, such as air freshener, may be reduced by more than 30%

Other than Aldi’s success, there is science behind the impact of reducing choices. A TED talk from Colombia Business School in 2011 demonstrates fewer choices can help customer engagement. Proctor & Gamble reduced the options available with their Head & Shoulders brand from 26 to 15 and saw a 10% increase in sales. Golden Cat Corporation got rid of their 10 worst selling varieties of cat litter – an 87% increase in profits followed. After highlighting these examples, the Colombia presenters revealed their own research which demonstrated stronger customer engagement could be achieved by reducing the choices offered.

Reengaging customers is core to Tesco’s strategy of reclaiming customers from the German discounters. This rise in sales clearly shows the reduction of products on offer is not having an adverse impact on Tesco sales, and they are starting down a more profitable path.

WHAT WE KNOW FOR SURE AT SWL…The offer at Tesco is clearly increasing its appeal to customers who are returning. The surest way to enhance customer engagement is to involve them in decisions being made, which promotes stronger customer loyalty. The best way to confirm customer satisfaction with changes to operations and shape a better store future is with SWL-Continuous Customer Engagement (CCE).

can managers drive productivity growth?

In April, the first dip in employment figures for 3 months was released. Despite the dip, the employment rate is still on par with the highest rate since the 1971 comparable records began. It’s good to look at this progress and ask a bigger question

First the facts

Office for National Statistics (ONS) reported that Employment fell by 10,000, which does not affect the overall employment rate, which remains at 74.1%, as it has been for the last 3 months to February – this is the highest rate of employment and has been maintained for a quarter of the year.

When we look at the detail we find that 40,000 more people were in full time employment than the previous month, the dip has come from there being 50,000 fewer people in part-time employment. This has led to an increase in unemployment, but is still lower than the same time last year, by 142,000 people.

Remember the furore about Zero hours Contracts? – well Geraint Johnes, Director of Lancaster University’s Work Foundation also highlighted that over 27,000 full time self employed workers moved into employment, a “continued move towards job security”…enough said!

Of course the bigger question which UK Business must now face is a very old one – we have improving employment, but can we engineer our workers to be more productive?
In 2012 ONS reported that UK had the lowest productivity of G7 nations “Output per hour in the UK was 15% below the average for the rest of the G7 industrialised nations in 2011, the widest Productivity Gap since 1995”

As Peter Cheese from CIPD commented “one explanation is that we genuinely work less hard or produce less efficiently than the rest of G7” and of course then there is the old explanation of UK being a nation constantly on Holiday…but neither he nor SWL believe these explanations to be true

So what are the reasons for this lamentable position?

In 2011 CIPD believed it was all about Low Demand & “Skills Hoarding” – there wasn’t enough demand in the market place, so Revenues were lower, but Businesses had already got rid of the fat, and didn’t want to get rid of the Muscle which they would need when the economy grew.

One good example of this Skills Hoarding was Vauxhall in Ellesmere Port where a version of Annualised Hours was implemented effectively “prepaying” for future overtime, but clearly manifesting itself as low productivity when Demand is low.

Ok so let’s wind forward to 2016 and, with our wealth of employment resources, we have a good foundation in UK to accelerate our productivity

Mark Beatson, Chief Economist at CIPD comments “Now is the time for business to invest in new Equipment, Processes and in developing the Workforce, whilst interest rates are low and before skills shortages become widespread…Business & Government need to recognise that people drive workplace productivity and that the right training and skills development is key to unlocking Business Potential”

WHAT WE KNOW FOR SURE AT SWL…it’s great we have so many more people in work and the challenge is now firmly on Management to deliver improved Productivity by every key measure. Targeted Training with forecasted outcomes and properly landing New Processes will be the foundations of this Productivity Improvement

Using SWL’s Productivity Methodology and CCESWL guarantees to deliver you the full value of your Training and New Process investment not only Financially, but more importantly in the eyes of your Customers

what a surprise!...retailers fight “same work, more cost”

Much hilarity in the SWL office this week when we heard a new B&Q strapline on the radio and I confessed that, in the post Mad Men era, I worked for a Tour Operator and one of our straplines was very similar, the gloriously creative “Giving you more for less”, which we felt was a worthy headline for a campaign advertising our £99.99 holidays in Majorca

Strangely our creativity never got the recognition it deserved, but we sold out the programme because, of course, the strapline was way less important than the price

A much more important event is now in law which could be summarized by the strapline ‘Same Work, More Cost’. For the employee this is fine, for the business it is not good at all – yes we are talking about the increased cost of HR in the UK when National Living Wage became a reality for UK businesses last week

The numbers are really significant

  • National Living Wage will generate one of the biggest large scale pay increases ever – it’s a whopping 10.8%
  • It will have a broad and far reaching impact – 1.9 million workers are estimated to be directly effected
  • Plus an additional 2.6 million workers are expected to enjoy ‘ripple effect’ increases

Of course it is impossible for employers to accept the reality of “Same Work More Cost” without trying to mitigate it,

CIPD say that 8% of UK employers are actively changing their recruitment policies to reduce costs

and for employees it is impossible not to react to these “unexpected” additional changes to their working lives

Guardian says B&Q have received a petition signed by over 128,000 people complaining about changes including reduced overtime rates

The only surprise here is that BRC have only recorded 8% of Retailers seeking to change what they do…at SWL we know that many more Retailers are actively working on HR cost reduction, and many have already adopted more elegant solutions

WHAT WE KNOW FOR SURE AT SWL is that our CLEARMATCH approach of mapping human resources, by skills and costs, with customer patterns and your evolving service offer really works. It makes service and cost management a continuous process with predefined milestones
SWL Customers always know their cost budgets and service targets. This means that we can plan for the future and leave the patellar reflexes for politicians and orthopedic surgeons