Saturday 26 May 2012

Tesco’s big drop may indicate a shopping revolution

14 January 2012

Poor Tesco. It wanted a Big Price Drop – just not in its shares. The giant grocer saw its stock price plummet 16 per cent yesterday, a £5 billion wipe-out in market value, after warning that its UK profits may fall this year. If Tesco does eventually report a decrease in earnings, that would be its first time in three decades. It would also be tangible proof that the way we are shopping is changing, perhaps irrevocably.

Everyone knows Tesco is Britain’s biggest supermarket chain – literally, in terms of size, because there’s just about one in every corner. But is such hulking, costly omnipresence proving a help or a hindrance in the internet age? Online spending totalled more than £68 billion in the UK in 2011, estimates the Interactive Media in Retail Group (IMRG) – a rise of 16 per cent from 2010. Mobile shopping – via iPads and Kindles – is also increasing sharply. Clothes and housing appliances, in particular, are doing roaring business in cyberspace.

Tesco has a large homeware business compared with its smaller competitors, and this sector was always expected to do relatively worse, as The Guardian points out – it’s the area consumers cut back on, during financially straitening times. Still, there’s no denying that a greater and greater chunk of such purchases are being carried out on the internet. No wonder then that Tesco’s chief executive Philip Clarke plans to slow down the rate of store openings in the UK, calling this is a ‘challenging consumer environment’ for hypermarkets.

There are also indications of a polarising in consumer habits. On the one hand, we're opting to buy the practical, non-perishable stuff such as electronic goods online, so they can be conveniently delivered to our door. On the other hand, when we do go out to shop, we want it to be a pleasant experience as opposed to a purely pragmatic one – our choices aren’t based solely on price. The retailers that have done well this difficult year, somewhat paradoxically, are the more upmarket ones such as Waitrose, M&S and Sainsbury’s.

Tesco forged ahead in the 1980s and 1990s, based on the unarguable premise that people like to view an array of goods all in one place. People still do, but unfortunately for the hypermarket chain this place may now be the internet.

More articles from: Clarissa Tan | this section

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