Tesco has announced that it will close its Customer Engagement Centre (CEC) in Cardiff next February as part of new cost saving measures. In total Tesco will employ 850 fewer customer service staff as it axes 1,100 call centre jobs in Cardiff and adds 250 to its second location in Dundee, Scotland, where Tesco’s CEC will now be centralised.
The retailer, which plans to acquire wholesaler Booker later this year, last week announced six consecutive quarters of like-for-like growth including a 2.3% rise in the UK.
In a statement, UK CEO of Tesco Matt Davies said: “The retail sector is facing unprecedented challenges and we must ensure we run our business in a sustainable and cost-effective way, while meeting the changing needs of our customers.”
Since his appointment to turn around Tesco’s fortunes three years ago, CEO Dave Lewis has continued to live up to his “Drastic Dave” nickname. Cost reductions at the retailer have been aggressive. Over the past three years of turnaround around 5,000 head office and UK store management jobs have been cut. The retailer has closed 48 underperforming stores, reconfigured larger stores, simplified instore operations and reduced roles overseas. Tesco is targeting a GBP1.5bn (EUR1.83bn) reduction in operating costs by 2019/20.
But through investment in lower pricing Tesco has proven that it can win back shoppers, as demonstrated by impressive growth in the UK, which last quarter was driven by food. With its Booker acquisition looming, there is now also an additional incentive to free up funds as these can then be redirected for investment in the merger. The timing of this latest announcement was rather inconvenient, however, following as it did a week of IT outages for Tesco that affected both customers of its online delivery and banking operations.
Tesco is not the only UK retailer focused on efficiency and consolidation, rather it has become a trend, or more a necessity. In a highly competitive market we have seen the Big Four UK retailers focus on store closures and job cuts as a priority in order to invest in lower prices to compete against the growing discount sector. It’s a trend that is unlikely to go away anytime soon. With rumours of Sainsbury’s eyeing Nisa and last week’s move by Amazon to acquire Whole Foods, we can expect further consolidation and shake-ups as each retailer fights to keep their place in the new order.