Has Tesco missed a business opportunity by closing delis?

Tesco’s announcement that it will close deli counters in 90 of its stores because they do not make enough money, has polarised opinion, in exactly the same way as Trump and Brexit.

Some people say it is simple logic – if delis do not make money then they should be axed; all this in the context of other cost cutting by the UK’s largest grocer which seem harsh, such as getting rid of hot food in the staff canteen.

At the other extreme, I have yet to find anyone in my network of retailers, analysts, tech companies, marketers, and digital agencies that support the plan to close the delis. Their view is that delis are an important differentiator for Tesco and, rather then close them, why not do them better.

Certainly, the decision goes against current opinion that, to get customers to go into a store, you need other enticements than just aisles and aisles of packaged goods. The Harris & Hoole coffee chain was part of that thinking – let’s make the shopping experience more pleasant and maybe it will last longer, and be more profitable for us. So, the perfect combination of customer care and profit motive.

Clearly, grocers don’t have the same problems as the rest of the high street which continues to move on line, and their main focus is how to compete with each other. So the decision to shut loss-making elements is an easy one if it means that lower costs will enable lower prices.

However, the customer seems to have a more nuanced view. Mine is that, while I don’t use the deli counter at Tesco, I do value it in the context of the wider store. I look to the deli for ideas, even if I then just go and get the same product off the main shelves. The deli sits in my consciousness as part of the appeal of the whole store, so influences my decision to shop there. I also shop there because the staff are friendlier than elsewhere so I hope losing their hot dinner won’t make them grumpy.

So, what I am saying is, as a customer is, if you are serious about putting me first, then keep the delis going. Unless what you are really saying is, if we don’t close the delis, then there is a risk that prices of other goods will rise? That argument won’t work with me.

My view is that Tesco could have taken all the other deli counters on and done a better job. They talk about meal planning but this does not play out in store. They have a Finest Range but use it rather aggressively to get middle class people to trade up. Why not appeal to the time-poor, the new vegan, the millennial and other segments and offer them something of value that no other supermarket chain does. Doesn’t really sound like Tesco does it?

Anyway, if you want to know what everyone else thinks, look no further than our good friends at Uncrowd with their latest study of the deli story. Boy, Hammond must have been up late to pull this off. https://www.retailergrader.com/tescoshocker/

 

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