Best of the Week
Most Popular
1. US Housing Market House Prices Bull Market Trend Current State - Nadeem_Walayat
2.Gold and Silver End of Week Technical, CoT and Fundamental Status - Gary_Tanashian
3.Stock Market Dow Trend Forecast - April Update - Nadeem_Walayat
4.When Will the Stock Market’s Rally Stop? - Troy_Bombardia
5.Russia and China Intend to Drain the West of Its Gold - MoneyMetals
6.BAIDU (BIDU) - Top 10 Artificial Intelligence Stocks Investing To Profit from AI Mega-trend - Nadeem_Walayat
7.Stop Feeding the Chinese Empire - ‘Belt and Road’ Trojan Horse - Richard_Mills
8.Stock Market US China Trade War Panic! Trend Forecast May 2019 Update - Nadeem_Walayat
9.US China Trade Impasse Threatens US Lithium, Rare Earth Imports - Richard_Mills
10.How to Invest in AI Stocks to Profit from the Machine Intelligence Mega-trend - Nadeem_Walayat
Last 7 days
S&P 500 Stuck at 2,900, Still No Clear Direction - 17th June 19
Is Boris set to be the next Conservation leader? - 17th June 19
Clock’s Ticking on Your Chance to Profit from the Yield Curve Inversion - 17th June 19
Stock Market Rally Faltering? - 17th June 19
Johnson Vs Gove Tory Leadership Contest Grudge Match Betfair Betting - 17th June 19
Nasdaq Stock Index Prediction System Is Telling Us A Very Different Story - 17th June 19
King Dollar Rides Higher Creating Pressures On Foreign Economies - 17th June 19
Land Rover Discovery Sport Tailgate Not Working Problems Fix (70) - 17th June 19
Stock Market Outlook: is the S&P today just like 2007 or 2016? - 17th June 19
US China War - Thucydides Trap and gold - 16th June 19
Gold Stocks Bull Upleg Mounting - 16th June 19
Gold Price Seasonal Trend Analysis - Video - 16th June 19
Fethiye Market Fruit, Veg, Spices and Turkish Delight Tourist Shopping - 16th June 19
US Dollar Gold Trend Analysis - 15th June 19
Gold Stocks “Launch” is in Line With Fundamentals - 15th June 19
The Rise of Silver and Major Economic Decline - 15th June 19
Fire Insurance Claims: What Are the Things a Fire Claim Adjuster Does? - 15th June 19
How To Find A Trustworthy Casino? - 15th June 19
Boris Johnson Vs Michael Gove Tory Leadership Grudge Match - Video - 14th June 19
Gold and Silver, Precious Metals: T-Minus 3 Seconds To Liftoff! - 14th June 19
Silver Investing Trend Analysis - Video - 14th June 19
The American Dream Is Alive and Well - in China - 14th June 19
Keeping the Online Gaming Industry in Line - 14th June 19
How Acquisitions Affect Global Stocks - 14th June 19
Please Don’t Buy the Dip in Nvidia or Other Chip Stocks - 14th June 19
A Big Thing in Investor Education is Explainer Videos - 14th June 19
IRAN - The Next American War - 13th June 19
Boris Johnson Vs Michael Gove Tory Leadership Grudge Match Contest - 13th June 19
Top Best VPN Services You Can Choose For Your iPhone - 13th June 19
Tory Leadership Contest Betting Markets Forecast - Betfair - 13th June 19
US Stock Market Setting Up A Pennant Formation - 13th June 19
Which Stocks Will Lead The Cannabis Rebound? - 13th June 19
The Privatization of US Indo-Pacific Vision - Project 2049, Armitage, Budget Ploys and Taiwan Nexus - 12th June 19
Gold Price Breaks to the Upside - 12th June 19
Top Publicly Traded Casino Company Stocks for 2019 - 12th June 19
Silver Investing Trend Analysis - 12th June 19
Why Blue-Chip Dividend Stocks Aren’t as Safe as You Think - 12th June 19
Technical Analysis Shows Aug/Sept Stock Market Top Pattern Should Form - 12th June 19
FTSE 100: A Top European Index - 12th June 19
Gold Surprise! - 11th June 19
How Forex Indicators are Getting Even More Attention in the Market? - 11th June 19
Stock Market Storm Clouds on the Horizon - 11th June 19
Is Your Financial Security Based On A Double Aberration? - 11th June 19
What If Stocks Are Wrong About Interest Rate Cuts? - 11th June 19
US House Prices Yield Curve, Debt, QE4EVER! - 11th June 19
Natural Gas Moves Into Basing Zone - 11th June 19
U.S. Dollar Stall is Good for Commodities - 11th June 19
Fed Running Out of Time and Conventional Weapons - 11th June 19
Trade Wars Propelling Stock Markets to New Highs - 11th June 19
Best Travel Bags for Summer Holidays 2019, Back Sling packs, water proof, money belt, tactical - 11th June 19
Betting on Next British Prime Minister Tory Leadership Betfair Markets Forecast - 10th June 19
How Can Stock Market Go Up When We’re Headed Towards a Recession? - 10th June 19
If You Invest in Dividend Stocks, Do This to Double Your Returns - 10th June 19
Reasons for the Success of the Dating Market - 10th June 19
Gold Price Trend Analysis - Video - 10th June 19
US Stock Markets Rally Hard – Could Another Big Upside Leg Begin? - 10th June 19
Stock Market Huge Cosmic Cluster Ahead: Buckle Up! - 10th June 19
Stock Market Higher To Go? - 10th June 19
The Gold Price Golden Neckline… - 10th June 19
Gold Price Seasonal Trend Analysis - 9th June 19
The Fed Stops Pretending - 9th June 19
Fed Rate Cuts Soon; Bitcoin Enthusiasts Join Wall Street in Bashing Gold - 9th June 19
1990s vs. 2010s - Which Expansion Will be Better for Gold? - 9th June 19
Gold Price Trend Analysis, MACD, Trend Channels, Support / Resistance - 8th June 19
Gold Surges Near Breakout - 8th June 19
Could Gold Rally Above $3750 Before December 2019? - 8th June 19
5 Big Lies About Precious Metals Investing Exposed - 8th June 19

Market Oracle FREE Newsletter

Gold Price Trend Forecast Summer 2019

Tesco Bubble Bursts - Profits Crash As Big Spending Customers Quit Shopping on Poor Service

Companies / Corporate Earnings Oct 24, 2013 - 01:38 AM GMT

By: Nadeem_Walayat

Companies

Tesco, Britains biggest super market has seen its profits crash by 23.5% to £1.39 billion for the 6 months to Sept 30th, surprising the markets and prompting many worried investors such as Warren Buffett to start existing their Tesco holdings (Buffet cut his holding near immediately by 1/5th) as clearly something is seriously going wrong at Tesco's resulting in competitors such as Sainsbury's winning market share away from Tesco, which illustrates that it's a lot quicker on the way down than it was on the way up!


Whilst the mainstream press focused on the global impact on reasons for the profits crash such as that 70% drop in trading profits from eastern europe to £55m. However, eastern europe is just a mere drop in the Tesco ocean which still relies for the bulk of its profits from UK trading (£1.1bn) where the real reasons for the collapse could largely be due to an exodus of large spending customers as a consequence of a stream of promotions that customers are unable to capitalise upon due to poorly paid, trained and motivated store staff, which is especially true for the high spending customers where for instance on promotions such as spend £40 for a £5 off voucher on your next shop results in customers LESS likely to shop at Tesco stores in the future.

The problem at the heart of Tesco promotions is that the offers are poorly advertised in the stores so customers only tend to find out about them AFTER they have completed their purchase at the checkout and thus large shop customers fail to capitalise on the offers as for instance a £200+ shop customer could be in receipt of just one £5 off voucher instead of five (£25) if at checkout they had split the shop up into five separate £40 purchases for 5X£5 vouchers, a huge difference which will tend to leave a bitter taste in the mouths of big spending customers as to why the checkout Tesco staff failed to suggest splitting the shop up, this is the real experience of shopping at Tesco store's such as their Abbeydale, Sheffield superstore.

However the situation for big spending customers gets worse for if customers had managed to capitalise on £5 off vouchers by splitting their shops up then at their next shop they can find themselves actively discouraged from capitalising on the vouchers by splitting up the purchase by members of Tesco checkout staff making customers feel highly uncomfortable by repeatedly making comments such as -

"That you are not being fair on the other waiting customer(s)."

If customers are not being fair by splitting up £200+ shops then Tesco should not engage in promotions that their staff discourage customers from capitalising upon!

The consequences of which is that Tesco would be far better off NOT engaging in such promotions because it will result in large spending customers being less likely to shop at Tesco stores again, as competitor supermarkets that may be 2 or 3 times distance don't carry the additional burden of having to go through the stressful process of trying to do the checkout persons job for them by being aware of all of the various promotions available, and what needs to be done to capitalise upon them such as splitting up shops, requesting dinnerware tokens whilst ignoring disparaging comments from the checkout staff.

At the end of the day - Shopping at Tesco's is just not worth the bother!

Off course customers in receipt of such bad service can take the time to write a letter of complaint and likely within a couple of months will be in receipt of a letter of apology with an accompanying £10 voucher (less than £20 potential saving that their shop originally carried).

But it is impossible to expect customers to complain after virtually every shop as it does not answer the problem's that continue to persist -

a. That promotions customers could benefit from are not being suggested to customers at checkouts, which has huge consequences for large shop customers, as much as a loss of £20 on their next shop on a £200 spend, or stickers they could have collected towards dinnerware.

b. Even where customers are aware of such promotions before checking out, customers can be presented with staff who tend to go out of their way to make the customer uncomfortable in attempting capitalise on the promotion i.e. " not being fair to other customers" when a customer attempts to break up a £200 shops into £40 checkouts. This is the real life experience of Tesco customers such as at their Abbeydale, Sheffield store.

This explains why Tesco profits have crashed as their clearly is an exodus of large spending customers that looks set to accelerate over the busy Christmas period.

The only way to fix a broken Tesco's is for Tesco to scrap any promotions that engage the store staff i.e. £5 off for £40 spend vouchers should be replaced with an automated 10% off your next shop promotion that are not reliant on the actions or inaction of store staff in the implementation of such promotions. Similarly stickers for dinnerware should be printed onto receipts so that it is not upto customers to remember to ask for them or rely on staff to suggest because in most cases staff won't, as the current consequences is for especially big spending customers being left to feel short-changed by store staff by not being in receipt of the money off vouchers and tokens that their large spend entitles them to and thus encourages the customers to shop elsewhere next time.

At the end of the day poorly paid, poorly trained and poorly motivated staff who are ordered around the stores as perpetual wage slaves by senior staff, are only able to exercise any power from within their bottom ranking existence when they deal with customers at checkouts, when they have the power to choose which customers they will select to capitalise on promotions and which customers they will deny in benefiting from promotions. I can imagine many Tesco wage slaves will look forward to such moments when they have the ability to flex some power during what amounts to a largely powerless working day.

The bottom line is that whilst Tesco management are busy conjuring up club card vouchers, tokens and sticker promotions to entice customers with, however these schemes are being actively undermined at store checkouts by badly motivated powerless staff who could not care less about Tesco's big picture and this is why Tesco's profits have collapsed and will likely continue their downwards spiral as Tesco stores are increasingly perceived as being places only good for a quick convenience shop rather than a place for the big weekly shops.

Tesco management need to go back to square one and realise that what customers want is value for money, not frustrating gimmicks that result in the waving of promotions in the faces of customers that they are frustrated out of capitalising upon. Tesco's demise seems certain as increasingly Tesco's wealthy customers will be found shopping at Waitrose whilst their poorer customers will be found at Lidl and Aldi (UK profits up 124%).

Source and Comments: http://www.marketoracle.co.uk/Article42813.html

Nadeem Walayat

http://www.marketoracle.co.uk

Copyright © 2005-2013 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 25 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis focuses on UK inflation, economy, interest rates and housing market. He is the author of four ebook's in the The Inflation Mega-Trend and Stocks Stealth Bull Market series.that can be downloaded for Free.

The Stocks Stealth Bull Market 2013 and Beyond EbookThe Stocks Stealth Bull Market Update 2011 EbookThe Interest Rate Mega-Trend EbookThe Inflation Mega-trend Ebook

Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication that presents in-depth analysis from over 600 experienced analysts on a range of views of the probable direction of the financial markets, thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

Nadeem Walayat Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

sixpack
24 Oct 13, 21:22
analysis or anecdote?

Hi Nadeem.

thank you for your continuing work. would love to have a reading list that would inform me the way it does you.

For this article, this sounds more like anecdote than analysis. The share price is very high despite everything. Seems like a long term holding for many.


Nadeem_Walayat
24 Oct 13, 21:54
Tesco

Hi

The share price will be high because we are in a stocks bull market, the price has to be analysed relative to competitorrs.

All companies eventually reach a point from where they decline, I think Tesco's best days are behind it.

It is just too big to adapt and will likely continue losing market share to much smaller competitors.

Best

NW


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules