Future of tesco, morrisons

redbuzzard

I'm nursing a loss on Tesco like many, and hope the income holds up. I'm prepared to hold mainly because Tesco has probably the best market position and opportunity. 1700 convenience stores puts them well ahead of rivals in following that particular trend too.

The point has been well made here that the growth of online just increases costs for the supermarkets, unless and until they can achieve comparable profitability for online AND cutout the redundant costs in bricks and mortar outlets, which won't be easy - who is going to buy them?

If I were in Tesco, my contribution to the ideas session would be to identify the stores with the lowest ratio of retailing NPV to their value for housing development and see what that looks like - we could certainly do with some more houses. Maybe a housebuilder would be a good acquisition for Tesco.

They still have the resources to attack and transform online shopping, and I expect them to.

Morrisons will also leapfrog the old online models with its Ocado partnership. Ultimately, if online ordering and delivery really is more expensive than operating stores even with much higher density through growth, that will work its way through into pricing. It isn't free to collect your own shopping; going to the nearest supermarket to do mine costs £3 in fuel alone, it's far from fun, and takes the best part of two hours start to finish. Online will continue to grow, and the big four will serve that market or die.

It's easy for Aldi and Lidl to increase share becuase they still have <10% between them. They are in their own space race which will at some point make them a hostage to fortune. We have been Aldi users for certain, mainly non-food, items for some time - washing up liquid, soap powder, for example - but they have nothing like the number of lines of a Tesco or a Morrisons so there is a limit to how big they can get with their current model.

What does impress me about Aldi is the way the staff work - the stores seem very lightly personed compared with say Tesco's. But the service isn't that good as a result. Not everybody likes having their groceries chucked at them and having to cart them off to a shelf to pack them up.

Times do look to be getting tougher though, and profits will probably go lower as a norm - but Tesco won't be the first to run out of ammunition in the price wars, its scale should give it the lowest unit costs.

Glen_Clark

redbuzzard wrote: »

going to the nearest supermarket to do mine costs £3 in fuel alone, it's far from fun, and takes the best part of two hours start to finish.

Exactly. And when you get home you know where to go and walk straight in with it whatever time of day or night. Wheras delivery drivers have to find your house, somewhere to park, fit around a time slot, sometimes people are not in etc, so it takes them longer than it takes you. Thats why Ocado has always run at a loss. Yet some people still see moving to online as a panacea for everything, sames as the last round of dot com lunacy.

planteria

good posts.

so, Glen, do you think that Morrisons' approach of a deal with Ocado to manage online, along with a focus on further improving their in-instore offer, focused on food, including a good proportion of fresh food, is a good one?

Glen_Clark

planteria wrote: »

good posts.

so, Glen, do you think that Morrisons' approach of a deal with Ocado to manage online, along with a focus on further improving their in-instore offer, focused on food, including a good proportion of fresh food, is a good one?

I think its a good one for Ocado because Morrisons overpaid.
But new technology could be good for Morrisons - last year they were the only supermarket chain where staff still walked around the store noting down what thedy need to fill the shelves on pen and paper. Much labour could bed saved if they can train their staff to use the new technology, but therein lies another problem. Morrisons employ a lot of older people who tend to be slower to learn, and less keen to learn new technology when they don't have many working years ahead of them to take advantage of it - seek promotion etc.

alanq

Today's Wake Up To Money on BBC Radio 5 Live was almost entirely devoted to Tesco including an interview with the CEO (unfortunately broadcast as clips spread throughout the 45 min. programme).

http://www.bbc.co.uk/programmes/b042lgtv

Glen_Clark

Currently touring Devon and Cornwall and keep seeing online shopping vans struggling through the narrow lanes and villages. But then I suppose people living up a narrow winding track in the middle of nowhere are the most likely to order online. How can the supermarkets make a profit out of deliveries like this?

antrobus

redbuzzard wrote: »

....Morrisons will also leapfrog the old online models with its Ocado partnership. ....

Not sure how. Ocado hasn't managed to leapfrog anyone so far.

Actually the Ocado model suffers from one big disadvantage. They can't do 'click and collect' because they don't have anywhere to collect from, and 'click and collect' is supposed to be the 'big thing'.

Does Morrisons do or plan to do click and collect?

planteria

Glen_Clark wrote: »

..last year they were the only supermarket chain where staff still walked around the store noting down what thedy need to fill the shelves on pen and paper. Much labour could bed saved if they can train their staff to use the new technology..

well, staff may have checked that the system was showing the correct stock levels, or something along those lines....but Morrisons certainly have an EPOS system:)

Thrugelmir

Glen_Clark wrote: »

Currently touring Devon and Cornwall and keep seeing online shopping vans struggling through the narrow lanes and villages. But then I suppose people living up a narrow winding track in the middle of nowhere are the most likely to order online. How can the supermarkets make a profit out of deliveries like this?

Plenty of money in the rural parts of the West Country........

Glen_Clark

Thrugelmir wrote: »

Plenty of money in the rural parts of the West Country........

Like the rest of England there are extremes of wealth and poverty side by side. But that makes no difference to the price of the products or the delivery charge so I don't see how it makes these deliveries profitable.
In other delivery operations you have easy deliveries to balance out the hard ones. But I guess the people who order groceries online are more likely to provide hard deliveries (by that I mean poor road access and far apart, so they are loss making for the courier when they have to do the whole area for a fixed price)