Tesco Restructuring their Philosophy

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In a pair of announcements released today, supermarket chain Tesco (LSE:TSCO) announced that it would be ceasing operations of its Tesco Cars arm, while it would also be revamping its line of low-cost, “value” groceries.

Tesco Cars, launched last year in partnership with Carsite, was projected to list up to 3,000 used cars online every month. However, it was recently revealed that the website was only selling around 150 used cars per month, causing the company to question and eventually shutter the venture altogether.

The news is unlikely to cause significant shock to Tesco, as the supermarket giant only had a 25% stake in the venture. However, the news comes during a time of uncertainty for the company. Just last month, Tesco’s UK chief Richard Brasher quit after a disappointing sales performance, while in January, the company announced that it had lost nearly £5 billion in market value due to a poor Christmas shopping season.

In light of recent shortcomings, Tesco’s newly rebranded line of low-cost products maybe seen as an immediate fix whilst the economic downturn persists.

The product line, called Everyday Value, will replace the Tesco Value line, formerly the U.K.’s largest supermarket sub-brand, netting nearly £1 billion in annual sales.

Many view the rebranded line as an attempt to upmarket their low-cost products, with food being marketed in sleek, well-designed packaging that has been compared to Waitrose’s Essentials line.

Corporate Commentary

On Tesco Cars: “We started Tesco Cars in good faith and we always aim to do a good job for customers. However, following a review of the business model we and Carsite, our partner, have decided that we cannot offer customers a satisfactory range of vehicles and as a result, have decided it is right to close the business.” – Statement from Tesco Cars Website

On the Everyday Value line: “Tesco was the first supermarket to launch a Value range back in 1993, the blue-and-white striped brand giving customers a down-to-earth option. Almost 20 years on and an affordable quality range is more relevant than ever, but customer needs have changed. We have listened closely to what our customers want and Everyday Value will provide products that taste better, look better and are healthier – still at the same great price.” – David Wood, Tesco UK Managing Director

Company Spotlight

Tesco is one of the world’s largest retailers operating in 14 countries with 492,000 employees. Tesco also operates Tesco’s Petrol Filling Stations, online business via Tesco Direct, and banking business through Tesco Bank.

References
 Company History
↑ The Guardian
↑ The Telegraph
 Tesco Cars Website
 Tesco Press Release
 Company Corporate Profile

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