Tesco Profits Panic! Back to Back £5 Off £40 Shop Voucher Promotions

By: Nadeem_Walayat

Tesco, Britain's giant supermarket chain is once more reeling following its latest trading results that reveal another bad year with profits slumping by 7% as the discount chains such as Aldi and Lidl continue to consume King Tesco's market share that fell to a 10 year low of 28.6% that sows the seeds for the market leader ultimately to join the ranks of has been's such as Morrisons that has been floundering in the supermarket wilderness for over a decade now.

Tesco reported profits falling by 6.9% to £3.1bn and like for like sales by 1.4% is a continuing trend of Tesco's being hit by over seas losses such as a huge mark down of £734mln of value of european assets coupled with a 28% profits slump, that followed last years U.S. stores fiasco that resulted in a £1.2 billion write down.

Tesco is battling against Aldi and Lidl discounters against whom it just cannot compete as similar weekly shops albeit with less choice and a poorer quality of product and service tend to cost a good 1/3rd less than a similar shop at a Tesco store would cost.

Therefore the only way Tesco can compete is to replicate the discounters in terms of product, range, quality and service which means downsizing giant over stocked and staffed stores, something that is not apparent in any of Tesco's statements or actions as the super market chain has been on a trend of creating hundreds of costly to run Tesco express and Metro stores when instead the optimum size is somewhere between a super store and a express store.

Tesco's reaction to another set of bad results can best be described as panic! As firstly Tesco management ahead of the expected bad results revised the usual periodic promotion of spend £40 for a £5 off voucher on your next weeks £40 shop to spend £20 for a £5 voucher off next weeks £40 shop. However following the results this was followed by ANOTHER back to back £5 voucher for each £20 spend of your next £40 shop promotion, so shoppers get to TWO consecutive weeks of discount shopping.

For example this would translate into a £200 weekly shop generating £50 off next weeks £400 shop, which would again result in another £50 off the following weeks shop.

However a possible problem that I raised 6 months ago is that there is a chance that Tesco store staff may not take too kindly to the inconvenience of large shops being broken up to capitalise on voucher promotions.

24 Oct 2013 - Tesco Bubble Bursts - Profits Crash As Big Spending Customers Quit Shopping on Poor Service

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)."

The best way to ensure that regular Tesco customers do not miss out on these random promotions that appear to be more aimed at new customers is to do a quick google search for "Tesco £5 off" prior to each shop.

Source and Comments: http://www.marketoracle.co.uk/Article45269.html

Nadeem Walayat

http://www.marketoracle.co.uk

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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.

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