Despite its vast size, Tesco (TSCO) is a relatively simple business to understand. Britain’s biggest supermarket group takes more than one in every four pounds spent on groceries in the UK and its sales are expected to reach about £70bn this year – more than double that of its nearest competitor, J Sainsbury (SBRY).
The core of what it does has changed little over time, though, and as Sarah Ryle highlights in her book The Making of Tesco, it can still be summed up by a paragraph from its 1962 annual report. “The inflated profit margins taken by many other retailers can be drastically reduced for the benefit of the shopping public by Tesco’s methods of bulk buying, streamlined distribution and quick turnover, while ensuring continued profitability in trading.”
Essentially, it now combines founder Jack Cohen’s mantra of ‘pile it high, sell it cheap’ with a century’s worth of logistical and marketing expertise to make sure the right products are in the right place, at the right time and the right price. But what are the right products? And how does Tesco judge whether a price is acceptable?