Why has Tesco become such a basket case?

Experts, Mail writers and you the customers reveal what’s gone wrong with the supermarket giant

TESCO is under pressure to axe 200 stores — on top of 100 already closed or cancelled — after the supermarket giant announced a record annual loss of £6.38 billion.

The loss is the largest ever declared by a British retailer and reflects a seismic shift in shopping habits away from big supermarkets towards smaller budget stores.

Over the past 20 years, Tesco went on a spending spree to build up a vast land bank that was designed to expand its empire of some 3,000 stores.

However, families no longer want to do a big, weekly shop in a soul-less hypermarket. As a result, Tesco has been forced to slash the value of its property empire, sell off land cheaply and close or cancel more than 100 outlets, with the loss of thousands of jobs.

Britain’s biggest retailer made a profit of £1.4 billion on sales through the tills across the world in the year to the end of February, down by 60 per cent on the year before.

This profit was more than wiped out by £7 billion worth of one-off costs, led by a writedown of £4.3 billion on the value of its land and stores.

There was also a write- down of some £570 million on the food and other products sitting in its warehouses and stores, while the company has agreed to pump an extra £270 million a year into its staff pension scheme, which has a deficit of £3.9 billion.

The closure of more than 45 stores and its current head office in Hertfordshire will cost more than £400 million. The firm is also cutting back on future expansion, with the cancellation of more than 50 ‘big box’ stores.

The loss of £6.38 billion — the biggest in the supermarket’s 96-year history — was even worse than the most pessimistic City analysts had expected. Shares in Tesco closed down 5.2 per cent on the day, wiping around £1 billion off its stock market value and taking it down to just over £18 billion.

Here, retail industry veterans, plus Mail writers and readers, identify what on earth went wrong . . .

THE EXPERTS

Mary Portas, retail consultant THE problem with Tesco is that no one really likes the company. Consumers either want pure value, or want to be looked after and put first as customers. Tesco didn’t do either.

Today, people want brands they trust, and the truth is Tesco acted in a bullish way – they built where they wanted, when they wanted, they didn’t care about the effect on communities . . . and now people are turning their backs on them. sir richard Greenbury, former chief executive of Marks & spencer WHEN I ran Marks & Spencer we looked at having a private jet for the board. I deemed it too expensive, even when we were making a billion pounds a year.

Tesco having four private jets tells you something about the culture of the place.

It has also tried to do far too much. It tried conquering the Far East, then conquering China. But to try to go into America at the same time was a very, very bad idea.

You cannot conquer the world overnight. Joanna BLYTHMAN, author of shopped: the shocking Power of british supermarkets I’M NO fan of supermarkets in general, but Tesco is at the absolute bottom of my list. Once upon a time, when we believed Tesco was good value and trusted the brand, we tolerated — up to a point — how five or six stores bullied their way into our communities.

But the arrival of Aldi and Lidl made us realise that the ‘Big Four’ supermarkets have been charging us way too much — earning extreme margins and profiteering at our expense. lord haskins, former chairman of northern Foods TESCO’S problem is that it tried to be all things to all men. It has vast stores that want to be an M&S and a Lidl all in one.

Asda concentrates on the cheapand-cheerful market, while Waitrose still targets the top end of the market, and both are successful for keeping it more simple. bill GRIMSEY, former boss of Wickes, iceland and Focus TESCO must be clear on pricing — it needs to stop the offers and promotions. If Poundland charges £1 for a cleaner, so should Tesco.

People want great value but consistency, too. Tesco also needs to rationalise the options of products — its stores have way too many product lines and categories. TOM SALMON, ran the now defunct hedon salads which supplied tesco

TESCO’S problem was that it kept screwing over its suppliers. It demanded a wave of charges for things like new label systems or the introduction of new technology. These charges to suppliers became more and more unreasonable, and in the end the company screwed its base.

MAIL WRITERS

SARAH VINE I’VE always defended Tesco to my middle-class friends. Remember, I’d say, not everyone can afford to buy their groceries at Waitrose.

But even I, a stubborn Tesco shopper, have fallen out of love with the store over the past couple of years. Besides its self-pay tills seemingly never working and its Finest range not being as fine as it used to be, its online delivery service is rubbish.

Over the years, I’ve flirted with all the supermarket delivery services, but, in the end, I settled for Tesco because it always had the best offers on quality dishwasher tablets — and lots of convenient evening delivery slots.

However, last year I switched to Sainsbury’s. There were four reasons I abandoned Tesco: rude delivery drivers who were often late; a slew of items substituted for ones I’d ordered; too many annoying flash sales (although Ocado is guilty of this, too); and one rotten tomato too many.

LIBBY PURVES FOR me, it was the sense of contempt. We had a local Tesco we used, in the absence of any good, big supermarkets in a rural area, and it was OK. nothing special, but handy for things the smaller shops might not stock and for bulk buys.

But a few years ago it increased the ‘homewares’ section and the children’s clothes, in roughly the same overall space. The aisles got narrower, the layout was confusing and the staff on the floor were fewer and surlier. It became a sweaty, irritating chore to shop there. So we stopped.

Meanwhile, the Co-op improved and then came a Waitrose, all smiley and willing and smart and not more expensive for basics. End of! ALEX BRUMMER, City Editor AT THE heart of the problems for Tesco’s new boss, Dave Lewis, has been some wildly over- optimistic accounting. Under his predecessor, Phil Clarke, the books essentially were cooked to make profits look stronger and debts look less than was truthfully the case. The Serious Fraud Office is investigating.

Over the past year or so, Britain’s biggest grocer inflated its profits in the UK and Ireland by as much as £326 million, by recording incentive payments from big suppliers that had not actually arrived, while failing to record the costs of some sales.

In the City, the arrival of a new boss often signals a ‘kitchen sink job’ under which all the bad announcements are made to the stock exchange in one go to signal the start of a better era.

In this case, it has resulted in a £6.4 billion loss.

SANDRA PARSONS TESCO’S problem is that it’s forgotten who its customers are.

Its founder Jack Cohen’s philosophy was simple: ‘ Pile ’em high, sell ’em cheap.’

You didn’t go to Tesco because you liked the service or aspired to throwing a classier dinner party. You went because it was the best value for money.

Today that’s no longer the case. not only are Sainsbury’s meat and its Taste The Difference range better quality than the Tesco equivalents, but they’re cheaper, too.

As an experiment yesterday, I did a basic shop of veg, fruit, bacon, chicken, detergent, cat food, bread, fizzy water and a bottle of Prosecco at both supermarkets.

Sainsbury’s came out £2 cheaper — and you’d save even more if you went to Morrisons, Asda, Aldi or Lidl.

JAN MOIR TESCO thought that ubiquity was everything. There was never enough staff in their thousands of stores, yet they kept opening more, sometimes even in competition with each other.

However, I believe Tesco’s fatal mistake was believing that consumers loved it for what it was. In fact, its core customers were interested only in the price. When the same or similar goods were cheaper elsewhere, they left in droves.

There was no brand loyalty, especially when everyone else started doing online delivery, too.

ROSE PRINCE ULTIMATELY Tesco has failed because it put quantity before quality.

Its mantra was ‘be big’; it wanted to dominate and did not care enough about where it sourced food or that customers’ tastes would change, particularly in a recession.

Tesco came off worst in the horse meat scandal because its staff did not ask the right questions when they bought the cheapest meat — and shoppers were repelled by the outcome.

There is also a sense the stores do not excel at anything in particular.

Just being ‘big’ is not a lasting philosophy. WHAT YOU SAID ON MAILONLINE

Rigrat, united kingdom: NOW they know how thousands of family-run grocers, butchers and bakers felt when they killed off High Street food shops.

alf artagen, Glasgow: TESCO: every Lidl doesn’t help. chilledcharley, chelmsford: I JOINED Tesco in 2002 and left in 2008. Tesco would hire people to work grocery, bakery, etc., and stick them on a till, rather than hire enough check-out staff.

The store manager had about as much ability to motivate people as a tin of potatoes. The ‘profit before people’ culture has finally failed them. Good riddance.

lovelife, sussex: Haven’t shopped there since they almost lost my family’s farm by dropping them like a stone when they decided to buy a particular product elsewhere.

Mr cole, birmingham: Their customer service is abysmal. They deserve what’s happening to them after years of ripping off customers with yo-yoing prices and fake ‘bargains’.

scottex, united kingdom: A supermarket should stick to what it is; there is no need to be selling tyres, televisions, telephones and trousers. Kwik-Fit doesn’t sell beans and carrots . . .

Phil, liverpool: RIP Tesco. You died of arrogance and greed.