Robert Peston goes Shopping

Transcribed from part 2/3, originally broadcast on 9 September 2013.

Tesco had steadily been making progress through the '80s but it wasn't until after the recession of the early 1990s that it really surged ahead.

The company's marketing boss Terry Leahy understood what his customers wanted:

[Interview with Terry Leahy]: "It turned out that our customers were the most reliable guide. They said, 'Look, we've been in recession, we need you to offer us good value, erm, we need you to be more aware of the pressures we're having today'"

Tesco responded by going back to its low-price roots. First it launched its Value range and then came the marketing slogan 'Every Little Helps'.

Tesco was cutting prices to boost sales while in contrast Sainsbury's was protecting it profits. This was a return to the glory days of Slasher Jack [Tesco's founder Jack Cohen]. Perhaps value was in Tesco's DNA.

Tesco always had a keen eye for price when dealing with suppliers:

[Excerpt from a much earlier programme about Tesco]: "Because one thing a price-cutting company needs is sheer size. The power to place orders large enough to force bargains with even the biggest suppliers."

Now it could offer even lower prices because it was operating on a bigger scale, enabling it to buy in bulk and sell cheap.

This was due to another canny move by Tesco. It bought vast amounts of [cheap] property during the recession of the early 90s, acquiring sites for a new generation of out-of-town superstores:*

[Interview with former Tesco boss Lord Ian McLaurin]: "We were able to accelerate it through sort of '93, '94, '95 and that gave us the opportunity to leave the others cold. And I mean they… they didn't catch up then and they haven't caught up to this day."

The other huge contributor to Tesco's rise came from Terry Leahy. He'd been pondering how to revive Slasher jack's retailing trick the loyalty scheme [Green Shield stamps]. What his team came up with was ClubCard…

By their own words etc.

So now we know why Tesco was racing ahead of the competition for ten years or so, muscling in on the land monopoly which it can use as a stick to beat suppliers and competition with, and also, despite what McLaurin says, why Tesco has been falling back again over the last five years or so. Land is incredibly expensive again, so it cannot repeat this "canny move".

* In my experience it wasn't just out-of-town, Tesco were actively in the market for any decent sized site, five acres and upwards, and if that was in a town centre, then so much the better, they'd happily open up there as well.