Tesco continued to show firm signs of recovery in its Christmas results which will be unsettling for its competitors in 2017. The retailer’s sheer scale, not only in food but across the entire retail market, means that any growth which it enjoys has implications for other retailers.
Clearly Tesco still has much work to do, but there is real evidence that it is making progress. Sales are back in growth and its market share in the grocery market has stabilised. Fundamental KPIs around customer satisfaction and availability have improved greatly. Suppliers also report a healthier dialogue with buying teams. In Savvy’s own research we find that 75% of shoppers say that Tesco is a retailer that they trust, while 77% believe the retailer offers good value for money.
At the same time we observe broader changes in competitive dynamics. Aldi and Lidl continue to grow apace, albeit with their rate of expansion slowing. Sainsbury’s performance has levelled off, but we expect to see synergies with Argos start to materialise in 2017 and we look forward to seeing how their marketing agenda develops following Sarah Warby’s departure at the end of February. Morrisons’ recent trading update suggests it may have turned a corner.
Of the big four, Asda faces the greatest challenges in 2017, as Sean Clark sets out to stop the retailer’s sales decline by improving its price perceptions against discounters, while establishing a clear and compelling point of difference.
For many years people looked to Tesco as the barometer for the industry. That may well start to be the case again in 2017.