How New Thinking Changed an Old Industry
Tesco Supermarkets was a distant #2 in South Korea with a fraction of sales and store locations compared to #1. Traditional retail dictates they should add stores and try to grow each location incrementally. Simple math: stores * rev per store. But Tesco didn’t think traditionally. They blew up the model.
Korean shoppers have very little time for household chores. Grocery shopping was a necessary weekly pain, not a beloved ritual. But the grocery industry has always relied on the necessity of shopping. Except for Tesco. They focused on the pain. They created a whole new approach to grocery shopping that virtually eliminates the inconvenience and time required to shop at a traditional store. Instead of asking customers to come to the grocery store, Tesco brought the grocery store to the customer.
Subway stations were wrapped with life-sized photographs of Tesco store aisles, each product QR Coded. While waiting for a train, consumers can snap QR code images and submit an electronic grocery order. A distribution center receives the paid order and sends it out for delivery timed to arrive when the customer gets home. Consumer engagement with the new shopping experience is high- Tesco has a winner.
This is the kind of break the mold thinking that startups make. When you have nothing, you have nothing to lose. You have to think different to win. But Tesco is a multi-billion dollar company. Lots of careers at stake with such a massive investment in marketing, operations and service. Those executives could have lived happy corporate lives opening new stores and running weekly specials. Virtual stores in subways required guts.
When faced with millions of entrenched assumptions about a market, it is more than easy to follow the established path. But the established path rarely leads to great breakthroughs. The iPad is not a better rotary dial phone. The virtual super market is more than a slightly better grocery store. Tesco focused on customer needs, even unarticulated ones. They changed the shopping paradigm and rethought distribution. Boom. Breakthrough thinking led to breakthrough success.
A major tip of the hat for Tesco’s corporate courage and execution. They thought big and did great.