Supermarket giant Tesco has announced record losses of £6.4 billion, rounding off a disastrous financial year dominated by an accounting scandal and ferocious price wars with cut price chains.
The company called the figures a “horror show” with an annual pre-tax profit of £961 million, down 68 per cent. Total UK sales were £44.6 billion, down 1.8 per cent, the Daily Mail reports.
Tesco and other supermarkets have been struggling to deal with competitors to the market including Lidl whose popularity has increased as middle class shoppers clamour for croissants at 29p and even a ‘deluxe’ range which includes dinner party staples such as baklava, macaroons and antipasti at a fraction of the price of other stores.
Speaking to the Today programme, Lord Haskins, the former chairman of food manufacturer Northern Foods said the fault lay with the lack of innovation.
“The absence of innovation within Tesco is startling,” he said. “‘Tesco used to be a great innovative company… if you stop innovating you’re dead.”
But many shoppers have been put off by the lack of customer service now seen in supermarkets with the rise of the shudder-inducing ‘self-checkout’ machines. The company, which used to promise to open another till if there was more than one person in front of you in the queue, has now stripped back manned check outs in favour of computerised tills which frustrate customers and staff alike.
Staff, who used to be able to build up a rapport with customers while they scanned and packed their shopping, are now left doing little more than overriding computer glitches arising from the dreaded cry of “unexpected item in the bagging area”. With rows of self service check outs being overseen by one harassed member of staff where 10 or 15 people used to be employed, the stress of supermarket shopping has only increased.
Lidl and Aldi, on the other hand, only have staff manning their check outs. It’s true that only about a third of them are ever in use at one time but tired shoppers at least get to dump their bargains on a conveyor and chat rather than having to wait five minutes for a sullen youth to work out why the computer has decided your 3 for the price of 2 rolls don’t weigh as much as it thinks they should.
And at the bargain stores, they also provide a little game when it’s your turn to have your items processed. At Tesco, Asda and Sainsbury’s, much of the time spent trying to buy their products is spent shouting at the inanimate object telling them that you have put your orange juice in the bag, leading to a frustrating dance of taking items out and putting them back in the bag in a slightly different place and with more force in the hope it will approve the additional weight on its teeny tiny scales.
But at Lidl, not only do you have the joy of someone else doing the scanning for you; someone who knows the secrets of the bar codes, you get to play ‘race the cashier’ as they process your ‘rice puffs’ and ‘monster claw’ crisps while you rush to cram them in as few bags as possible before they finish and you have to juggle paying with packing the rest of your shopping. Too slow, and you’ll be overwhelmed with freeze dried porcini mushrooms and vine ripened tomatoes piling up. Too quick – well you’re never too quick. And that’s the joy of it. They understand grocery shopping is a bore to be endured rather than an experience to be made more pleasurable through ‘innovation’ or an overwhelming array of products which you need staff to ‘approve’ anyway.
The downturn for the giant which once used to be where one pound in every 10 was spent on the British high street reflects a shift in shopping habits that it has failed to understand. Tesco has been left behind.
The total yearly losses of Tesco this year have been made much worse by £7billion of unexpected costs (or items in the bagging area, if you will) including a £3.8 billion review of its store portfolio in light of downgrading of store property portfolios and share values.
The firm has also revealed it had a net debt of £8.5 billion and a net pension deficit of £3.9 billion.
Queen of shops Mary Portas warned the government four years ago that high street habits were changing. And with the rise of online grocery shopping and local convenience stores, fewer people choose to run the gauntlet of a supermarket warehouse visit.
Trends show that it’s cheaper goods and customer service that we’re after.