Tesco was in the news again last week and so of course, given my history with Tesco, I couldn’t let it go without comment!
Tesco announces cuts to its business
Tesco announced last week that it was going to cut about 9,000 jobs. Well, the BBC announced it first jn their story Tesco counter cost cuts to hit 9,000 jobs, based on leaked information which said that the supermarket chain would be closing 90 counters and that bakeries would be using frozen dough. Tesco was then forced to issue a statement so that the BBC and others updated their stories.
The Tesco statement Building a simpler, more sustainable business said that “We expect that around 90 stores will close their counters, with the remaining 700 trading with either a full or flexible counter offer for our customers.” The supermarket giant is to make changes to stock management, reducing merchandising hours through simplification of layouts, changes to canteens and changes to make the head office leaner. Ultimately the changes will result in a loss of 9,000 jobs.
The statement says that Tesco colleagues have told them that they want to spend more time with customers. However in the same paragraph the company says it is reducing “the amount of layout changes we make, so it’s easier for customers, and less work for colleagues meaning fewer merchandising hours are needed.” In short, that’s not freeing up staff to serve customers is it?!
Backdrop to Tesco cuts
In the Tesco 3Q & Christmas Trading Statement 2018/19 CEO, Dave Lewis, said
“In the UK we delivered significant improvements in our competitive offer and this is reflected in a very strong Christmas performance which was ahead of the market. And “… as we enter our Centenary we are in a strong position.”
The company made 1.3 billion profit in 2017-2018 So why the cuts? Are they necessary? What will they mean for staff and customers? Is greed seeping into Tesco once again? In my blog article “The Real Reason Clarke was pushed” I explored how the previous CEO, Phillip Clarke, didn’t keep his eyes on his customers. Instead of watching his home market he went on a development spree round the world whilst in the UK Tesco kept losing money. Lewis’ answer was to close loss-making branches abroad and cut development of some planned stores in the UK. Jobs went from head office and one of the company’s larger offices closed down as staff relocated to the head office complex at Welwyn Garden City. Lewis has overseen a turnaround in Tesco’s fortune as customers return in their thousands. Is he now going too far in the other direction and losing sight of what customers want? Why risk what is going on at shop floor level where customers will be adversely affected? They weren’t affected directly by previous cost cutting activities but they will be with these changes. If cuts are really needed (and that is clearly questionable) should they not be evenly distributed across the whole business?
What will the Tesco cuts on the shop floor mean for staff?
Well, Tesco say that they “will be doing all [they] can to help colleagues affected by these changes, including offering redeployment opportunities wherever possible.” With a planned cut to 9,000 jobs, redeploying them all is unlikely.
Are all Tesco staff employed on an equal basis?
Nope. Whilst staff will see job losses it seems there are no plans to cut the salary or benefits for any members of the executive team. If there is a need to cut because there isn’t enough profit then why are those in charge being paid as if they were continuing the success? Is it because of greed from shareholders seeking more from the firm in dividends?
What will the cuts mean for customers and what will be the impact on Tesco?
It’s too early to tell, but other supermarkets will be watching with keen interest. Tesco say that it is cutting the counters because there is less interest in them in recent years. That’s probably due to the increase in online shopping. However, with all this cost cutting, presumably to try and compete with the discount supermarkets such as Aldi and Lidl, will Tesco just become one and the same? What happened to having a good range, good price and good service? Even if they can’t compete with the higher end supermarkets, such as Waitrose, why not fight for the top of the middle market? Is it a fight to the bottom? It looks to me like a short-term quick fix where the aim is to maximise profits regardless of quality and see what happens. It doesn’t look like a well thought-out plan.
Perhaps Tesco should be a bit more innovative and open up those counters to the local butchers and bakeries? Just rent out the space whilst offering more choice and helping local businesses. There are plenty of other ways of saving money and introducing innovative improvements to customer services rather than cut, cut, cut.
Tesco risks losing the goodwill of customers. It is going to harm employee relations without a doubt and could therefore damage the public image of Tesco. Tesco should be celebrating its centenary this year and laying off 9,000 loyal staff is not the kind of birthday present the company should be giving itself
What’s needed is more service, and less greed!