Briefs

Tesco: 'Wal-Mart's Worst Nightmare'

BusinessWeek, December 29, 2008.

As Tesco takes on the U.S. market, American companies like Wal-Mart are taking notice - and adopting some of the British megaretailer's strategies.

British retailer Tesco entered the U.S. market only last year but already it has managed to put Wal-Mart (WMT), the world's No. 1 retailer, on the defensive. Tesco (TSCO.L) fired the first salvo, in a battle that retailing analysts expect will intensify, by launching Fresh & Easy, a chain of 10,000-square-foot convenience stores, in cities across California, Nevada, and Arizona in November 2007. Eleven months later, Wal-Mart returned fire, taking on Tesco in Arizona with the debut of the similar-size Marketside, its first new store format in a decade.

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Analysts say that Tesco's big advantage over major international rivals, which also include Germany's Aldi and Lidl, is its unrivaled ability to manage vast reams of data and translate that knowledge into sales. While data crunching may sound dull, it has given Tesco two major advantages: an unmatched ability to operate multiple retail formats - ranging in size from convenience stores to hypermarkets - and the market knowledge to offer what many analysts say is the best and broadest range of house brands from any retailer.

Tesco uses information gleaned from Dunnhumby, a British data mining firm of which it has majority control, to manage every aspect of its business, from creating new shop formats to arranging store layouts to developing private-label products and targeted sales promotions. In 2003, U.S. supermarket chain Kroger (KR) copied Tesco's example, setting up a joint venture with Dunnhumby in the U.S. Since then, Dunnhumby also has signed deals with a number of other U.S. retailers including Home Depot (HD), Best Buy (BBY), and Macy's (M).

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