The Business Of
Tesco | What Do They Do?
Happy Monday all!
Welcome to Week 1 of The Business Of newsletter. We hope you had a lovely weekend and are ready to get stuck into our first business model together!
The first business model we've dive into is Tesco's. A company that students should hopefully be very familiar with - it’s the largest grocer in the UK and actually one of the largest retailers in the world! The great thing about studying the Tesco business model, is that you'll also get a good understanding of the business models of Sainsbury's, Asda and other supermarkets too.
The Big Brother
If you look in your kitchen, most things in there will have come from a supermarket. Apples, bananas, chicken, beef, pasta, Coke cans, Walkers crisps, Cadburys chocolate, Budweiser beer... I'll stop there! But where does Tesco get their stock from? Well, Tesco strikes up partnerships with the biggest brands in the world, including the ones we mentioned above and buys stock from them in bulk (to keep costs down) and then sells those products to us. They also partner with farmers and other suppliers to bring us the best fruit, veg and meat we all need! We'll dive into this tomorrow in more detail in the next section - How Do They Make Money?
The supermarket industry is a fantastic example of an oligopolistic market. There are a handful of companies that dominate this industry. Whilst Tesco is the market leader, they are a part of the 'Big 4' (Tesco, Sainsbury's, ASDA, Morrison's) - the top 4 supermarket chains in the UK. And the chart below shows how the Big 4 and two other leading players (Aldi and Lidl) compare in terms of UK store numbers.
Across Tesco's 2,813 stores, there are a few different formats to cater for different customer experiences. Sometimes we might need to visit a store just for a carton of milk. Other times we might need to do a large food shop for the week. Tesco caters for this by having multiple store formats - the main ones being Tesco Extra and Tesco Express. Extra stores are massive structures, and stock a wide range of food and non-food lines. Express stores are much smaller, items are often cheaper, and the range is often more limited.
The other way Tesco reaches consumers is through its website. Online has grown to be 13% of the business and has been a huge boost for elderly customers who may not be able to visit the physical stores.
Tesco is the largest private employer in the UK with over 300k employees in the UK and Ireland! This makes it the second largest employer overall in the UK, with NHS England still the leader with over 1.4m employees.
20th Feb 2023
That’s all for today. We’re back tomorrow with part 2 of Tesco where we’ll be looking at how the company makes money. And trust us, you’ll be shocked at the number one product sold at supermarkets!
Have a great day.
The Business Of Team