Tesco is set to close more stores in Poland. As dlahandlu.pl revealed, three supermarkets – in Konstantynów Łódzki, in Łódź and in Tuchów – will be closed in early 2018. According to the retail portal, Martin Beháň, CEO of Tesco Poland, informed employees about this step in a company e-mail. As principal reason for the decision, the former COO for supermarkets in the Central European region reportedly cited the negative sales trend of affected shops and an intensifying competitive environment. Tesco had already previously announced the closure of nine unprofitable stores in Poland shortly after Beháň took over his current position.
Tesco continues downsizing its business to get a grip on profitability. Despite posting strong quarterly results last month and reversing negative like-for-likes in the CEE region, the retailer had warned that its business in Poland remained challenging. The cost pressure and investment backlog, accumulated in recent years, can clearly be felt when visiting some of the retailer’s stores in Poland, especially in less developed regions. With discounters updating their stores to the latest standards while outmanoeuvring other players on price, the task of staying on track in this highly competitive market is a difficult one.
However, Tesco’s problems go deeper than just operating in the wrong channel at the wrong price. The retailer needs a revitalisation of its commercial strategy and the courage for credible storytelling. Here especially in the traffic-and loyalty-generating fresh ranges.
For instance, the fruit & vegetable section at Tesco comprises around 80 SKUs, whereas discounters have arrived at 100+, not including organic items as offered by Aldi and Lidl. Tesco’s department signage plainly reads ‘Warzywa Owoce’ (‘vegetables fruits’), but the discounters brand their ranges open-market style ‘Ryneczek Lidla’ (‘Lidl’s Marketplace’) and Biedronka’s ‘Warzywniak’ (colloquial Polish term for the fruit & vegetable stall around the corner).
The bakery department at Biedronka features a separate cooler for a dozen fresh pastries, individual wooden stands for baguettes and a boosted range of to-go savoury and sweet pastries. At the Tesco supermarket this development has not yet arrived. Where Lidl woos customers with the branding ‘Chrupiące z Pieca’ (‘Crispy from the Oven’) over elegant wooden department fittings with glass doors and wicker trays, Tesco supermarkets often still feature wire baskets.
Martin Beháň has inherited a challenging task. Nevertheless, a hint of dawn on the horizon is the noticeable improvement of quality and freshness in both above-mentioned categories as well as stronger price propositions in the ambient food ranges in recent months. Nevertheless Tesco has to rethink its commercial and branding approach, otherwise it will be in danger of becoming lost in no-man’s land with a blurry value proposition.