Tesco and its digital business model

In 2019, the gross sales of Tesco were £56.9bn which grew 11.3% compared with £51.0bn in 2018(Annual Report and Financial Statements, 2019). And the number of stores in the UK and Ireland was also growing from 2012 to 2019 which means Tesco is super popular in Britain and it has great progress. Under the background of digitization, if it wants to win the competition between several different supermarket companies in the UK, Tesco needs to change its traditional business model and operating model into new digital ways and luckily it is doing this thing. What Tesco has been improving are “click and collect” service by Tesco Direct, in-store customer experience, and digital loyalty card.

Tesco delivery service is very common for the British according to the figure about the top ten most popular online stores in the UK in 2018. It shows that Tesco was the top one of supermarkets compared with others like Ocado and Sainsbury while there was a huge gap between them. By online shopping, busy people do not spend time to go to the supermarket, what they need to do are click and collect. So more and more people prefer to finish stocking up on a few essentials online and there is no doubt that this digital tend would bring huge profits to Tesco. Based on the platform solely for home delivery, dealing with orders is becoming more efficient and the customer experience would be better which is beneficial to further development.

As for the in-store experience, the digital business mainly is showed by self-service checkout and in-store video cameras. Firstly, as self-service checkout has been very popular now, this digital service could increase the efficiency of checkout compared with only staff service. And the cameras near self-check machines could effectively fight against theft. Another kind of cameras is used to show whether the fresh vegetables and fruits are sold out or not if something is sold out then it will automatically send messages to staff for replenishment. Besides, Tap& Tag as new technology to replace paper receipts is also testing(Hobbs,2016). By this system, a customer could receive a digital receipt or discount information via e-mail, app or website after online registering. So, Tap& Tag as a new digital technology could become a new marketing channel, it not only could give customers more choices but also will be beneficial to attract customers to come back again by these tailored offers and messages attached. The technical program manager at Tesco claimed that a paperless future might come soon which means that wallets will disappear and everything like receipts, loyalty cards even bank information will be on your phone. With these digital technologies, Tesco creatives better in-store customer experience, and higher working efficiency.

Finally, digital loyalty cards are used to collect a big scale data of customers. People can get points by spending money online or in-store while these points can be changed into money. When the customer is checking out, he can pay by TescoPay+ which is a personal digital wallet got after signing in and getting a loyalty card. Also, Tesco uses the personal purchase history to predict what customers will buy in the future and give some corresponding personal discounts by big data analysis and algorithms. The promotion of club cards and a combination of digital wallets are useful to push customers to repeat purchases and increase their brand loyalty degree which would keep making positive influence on Tesco since it still has many competitors for example Sainsbury’s. From this figure, this digital card has seen a good result.

To sum up, people can easily find these digital changes in every Tesco store from Tesco extra to Tesco express, from big cities to rural areas. According to the official website of Tesco(the figure below), it shows the existing business model of this company. This model divides into three parts, they are customers, channels, and products. It can be found that two of these three parts are connected with digital technologies or digitized information, which are channels and products. As mentioned, online business based on digital technologies like delivery and personal promotions is covered by “channels” while the data about customers’ preference from a loyalty card would be used by the product work team belongs to “product”. If Tesco can make more progress in digitization, its future will be more successful.

Reference list

Annual Report and Financial Statements 2019. (2019). Retrieved 4 March 2020, from https://www.tescoplc.com/media/476422/tesco_ara2019_full_report_web.pdf

Statista. (April 25, 2019). Number of Tesco stores in the United Kingdom (UK) and the Republic of Ireland from financial year 2012 to 2019 [Graph]. In Statista. Retrieved March 05, 2020, from https://www-statista-com.uoelibrary.idm.oclc.org/statistics/490947/tesco-group-stores-united-kingdom-uk/

ecommerceDB.com. (December 9, 2019). Most popular online stores in the United Kingdom in 2018, by e-commerce net sales (in Million U.S. Dollar) [Graph]. In Statista. Retrieved March 05, 2020, from https://www-statista-com.uoelibrary.idm.oclc.org/statistics/870307/united-kingdom-top-online-stores-united-kingdom-ecommercedb/

Hobbs, T. (2016). Tesco trials digital receipts and self-scanner tech that aims to reduce theft. Marketing Week (Online Edition), 1.

Priori Data. (June 18, 2019). Leading lifestyle apps in the Google Play Store in Great Britain in May 2019, by number of downloads (in 1,000s) [Graph]. In Statista. Retrieved March 05, 2020, from https://www-statista-com.uoelibrary.idm.oclc.org/statistics/690402/leading-lifestyle-apps-in-google-play-in-great-britain-by-downloads/

Tesco business model, Retrieved From: https://www.tescoplc.com/media/264185/tescoar16_businessmodel.pdf