The real health of the Tesco brand

Dave Lewis, Tesco chief executive


We saw recently that Tesco announced a quite staggering £6.4bn loss on trading. A huge headline figure, but in reality a total myth to allow the business the time and money to restructure.

The loss was caused by £7bn of one off write downs including a property write down of £4.7bn. Now, I’m no accountant, but if my maths are anywhere near right, this will meant they can reclaim at least £1.4bn in tax on their profits they paid last year and maybe claw some back from previous years too. So rather than lose £6.4bn, they have actually made £2bn in actual cash profit in the last 12 months. With me so far?

On the day that Tesco made the announcement, their share price fell by 5% to 223p. But in reality it had been at a low of only 150p during that same year and it is a huge growth in actual value over the same period. It’s at around 216p today. Hardly the sign of a business in crisis in the eyes of the market.

The disparity in their profit is far stranger when you consider how they got away with such a HUGE property write down when Helical Bar, the (mainly) London based Property Developer announced yesterday that their portfolio had increased in value by 27% in the previous 12 months?

Each of the other supermarkets seems to have followed suit with huge portfolio write downs, which only goes to confirm that it is another corrupt accounting practice each of them is employing to claw back tax.

Jack Welch, the former GE CEO said in a famous interview that with bad news, you have to get it all out fast, as it’s going to come out anyway. This feels to me what Tesco have done. They have painted a picture that is even worse than reality to shock the expectations lower.

This will give them the time, money and opportunity to take stock and rebuild the brand by putting in front line staff. They need to rebuild relationships with suppliers and build trust with customers. They need to listen, adapt and listen some more. And then they need to action their ideas fast, before the market moves again.

The Tesco brand is not dead, it’s just sleeping. It’ll be back and hopefully with a little more grace and a desire to please customers rather than only focus on the profit.

Why social media matters?

The Luddites, fighting against change that was happening anyway
The Luddites, fighting against change that was happening anyway

There are two growing schools of thought with regard to social media.

School 1 – lets call them the Luddites
This social media lark isn’t for me. I am an estate agent, I sell widgets, I sell whatever. It’s all about wanky celebrities telling you what they’ve had for lunch isn’t it? Facebook is a load of teenagers that want to share their pointless pictures and get off with each other on the web, without meting each other and Google domaniates the search world and always will.

And there’s school 2
Lets call them sensible people, who understand that change is happening and happening fast. Those who don’t change will not survive. It’s a plain and simple fact.

I’ll steal a Charles Handy quote from my mate Tim Garratt’s ‘Adapt or Whither’ Blogpost here.

“If you boil water and drop a frog in it – it jumps out immediately. However, if you put that frog in a pot of cold water and slowly heat it, the frog adapts its body temperature to that of the water until at 100 degrees centigrade it boils alive”

It is a case of adapt or die. Those who don’t notice the change soon enough, will be left behind so completely, they will die.

Who would want to move into the printed media world right now?

Which is likely to grow fastest – printed or online media?

So I’ll give you some examples.

1. WordPress
They now provide more powerful and open source Content Management Systems (CMS) than almost anything else out there and it’s practically free. Their business plan is about selling small additional enhancements to many people for very little. We feel no pain in dealing with them and as I have shown here, they offer better customer service than anyone else in the CMS market anyway.

So traditional CMS is dead within the next few months or years. That’s a big or even huge market wiped out at a stroke. There were some bigger companies paying over £1m for a big CMS with less usbilty than WordPress offers now.

2. Traditional newspaper models
When Alexander Lebedev’s bought the London Evening Standard, according to the Guardian he paid £1. The Daily Mail & General Trust which owned the paper could see the writing on the wall in the paid regional daily newspaper sector and got out before the losses became too big. He has now switched it to a free model, so provides a great free product that has a chance of survival if it can grow its circulation again.

They were killed by their own Metro product distributed free in the mornings. They were damaged before this by us just getting out of the habit of reading papers and taking our news via all of the other media channels now open to us.

Evening papers are dependent on advertising revenue and with falling circulations, they couldn’t even attract the advertisers who are ALL switching to the more easily accountable online advertising routes.

There is still, without doubt a market for printed material, but it’s evolving fast and moving into niches rather than the mainstream. This was discussed in more detail here.

3. Printed books
I just didn’t get the point of e-books. I can’t say i’m going to own one anytime soon. I am an avid reader and I love printed books. My house and office is full of them. I love their smell their feel and the thought of sitting down to relax for a good read.

But there is a generation that doesn’t get it. Why would you carry hundreds of bulky books, when you can get them all on one good e-reader or Kindle?

And this is my point.

Its a generational change.

This generation are different. Like we as a generation are completely different to the generation before us. It’s called evolution.

It won’t happen overnight.

But it will happen.

This next generation won’t buy books, newspapers and they will not seek out products. Products will seek out them.

They will meet people on the Internet, like we met them at work, school, the pub or even out shopping.

Facebook is sure to add peer to peer video very soon and with over 300 million users already and growing fast, it will dwarf Skype and most other peer to peer communication tools. But it has a very young user base that will grow up knowing only this as their main tool to talk.

They will socialise online, as for many it will have become too expensive to get out and about. With retirement ages being raised across the world, to pay for our living longer, many of us will not be able to get about, unless we grow wheels.

It changes everything.

The world will be a different place and we need to recognise and act on this now.

This next generation will live in their convenient world of augmented reality and any brand owner who doesn’t see this can just hop into this nice cold pan of water I have waiting over here, whilst the world applies the heat.


Thanks to Tim Garratt for even more information on this.  He has pointed me towards an article in the London Times here which says that even the British legal system is having to change to reflect how the next generation behave. They are simply not used to sitting and listening and can only interact with an online interface. Help!

Updated again

This is a great YouTube video I picked up from the brilliant writers at Bitterwallet. It seems to back up what i’ve said above but is perhaps the first demonstration by the publishers that whatever the delivery method, people still value the content. I’m sure their right on this but if they’re not careful ad don’t adapt to these new delivery methods fast enough, the whole world will have moved on, before they even notice. And as Nobby pointed out in the comments below the article, in the very cleverly worded text, they cheated and at 1:23 added in a extra ‘of’ to the text so it makes sense when you read it backwards.