Tesco was one of the leading lights of Customer data analytics in the world of Retail. In 1994 they first looked into the Clubcard idea. They trialled it in a few stores, working with a Customer science company called Dunnhumby. Reportedly, the then Chairman of Tesco, Lord MacLaurin, commented “What scares me about this is that you know more about my customers after three months than I know after 30 years.” 1
Based on the Feedback and information they accumulated from the trials, they rolled it out throughout the Tesco business in 1995. This data was then utilised to target customer marketing, and supply chain opimisation, to drive profits across the company. Up until the early 2010s this was the textbook case study for customer data analysis driving profit:
CHANGE OF DIRECTION?
As late as 2013, Tesco “stressed that they do not sell their loyalty data to third parties”. 3
In January 2015, Goldman Sachs were brought on board to prepare the Tesco-owned Dunnhumby for sale, with a reported £2billion price tag attached.4
So, what happened?
Tesco announced a Pre-Tax loss of £6.38billion up to the end of February 2015. 5
Depending on what you’re reading, various areas are blamed:
- £250million profit overstatement,
- Competitive Marketplace,
- An unsuccessful attempt to expand into the American market with ‘Fresh & Easy’ convenience stores,
- Property & Share losses,
- Tesco, themselves blame a shift online, which while successful in itself, has seen profits fall.
I suspect it’s likely a perfect storm of all of the above, the worldwide recession, and Tesco taking their eye off the core business were to blame.
So, heads have rolled, and non-core businesses are up for sale or sold. Including the Clubcard consumer data.
WHO WOULD WANT IT & WHY?
Tesco reportedly have a database of one billion worldwide shoppers, and the experience to analyse & use this data for customer marketing.
“Major food and drinks companies like Coca-Cola, Unilever and Nestle, are all willing to pay Tesco for access to the data and the consumer insight and shopping habits it provides.” 6
Google & WPP, an advertising and marketing company are also in the mix.
At this point, you’ll read all over the internet about how Tesco were so focused on Data they lost sight of their customers, and maybe that’s true.
Tesco will also have to try and learn the lessons and turn the business around fast.
However, I’d like to cover two other points instead:
- Who you want to buy the data?
- Who owns the data?
WOULD YOU BUY DATA?
Tesco have been working with this data for 15/20 years now. They’ve maximised savings and learned quite a bit about consumer habits from it. But it didn’t stop them from falling & loosing customers. So, is it worth spending £2billion to buy it?
The low-cost competitors who are receiving some of the blame, don’t have loyalty systems. They spend a fortune on marketing to get customers through the doors, but they don’t market directly to specific segments of their customers. I don’t think many people would believe they’re not doing customer analytics without the customer loyalty schemes either. If they can do it alone, why can’t others? So, what will the new buyers of the database gain from buying the company?
They’ll get expertise in the form of expert staff. They’ll get access to a database they’ve never seen before, and may be able to derive new data from. However, the data is in the past. Technology and recession has changed buyer behaviour. So, is the data valid into the future?
Is it possible that the data itself was part of Tesco’s downfall? Was it prepared for the fact that I can order coffee capsules in bulk online, and will never need coffee from the supermarket? Or that if my next door neighbour does their shopping online that they’re not tempted by items they don’t need or pester power by their child? What about the statistical increase in one/ two person households in Ireland at least. Their shopping baskets are bound to be smaller that expected. 7
I agree that if the new owners ask the right questions of the data, they may get new answers that hadn’t been considered before. However, from my perspective, the employees may be the greatest asset in the sale.
WHO OWNS THE DATA?
OK, let’s be clear Tesco own the data, for now. As a customer, if you had a Clubcard, you were clearly swapping your purchasing habit data for ‘Points’. (The fact supermarkets, credit card companies, etc. collect it regardless of this permission is for another rant another day.)
However, I believe this was on the understanding that it stayed with Tesco for their use. The terms may now say, they can anonymise the data and share with third parties, but I suspect it wasn’t there in 1995/96!
Is this a breach of customer trust? Can I refuse to have my data transferred? Opt out? Or should I just accept it’s going to happen and forget about it? Frankly, I shop in Tesco about twice a year, so I’m not all that concerned on their behave. However, it’s the principle of a ‘fair’ swap that seems to be being phased out in this world of consumer marketing.
Of course, as a Data Analyst, I’d love to see what I could find in the data!
From one of the original innovators in Retail customer data analysis, Tesco are now having to go a new route. The Data will move on, and both Tesco and the new owners will have to re-think existing marketing strategies.
I think one of the most clearest pieces of knowledge to come out of this whole thing in the customers know what they want. When you stop delivering it, they’ll move on. You need to keep up with the changing world, but ensure you’re continuing to put customers first & foremost in your plans. Investing in side lines, and things your customers don’t value, is a recipe for failure.
In the end data can only try and give you an answer to question. If it’s the correct question you’re on a winner. If it’s not, you can go down the wrong path completely.