In the early 2000s, the UK was prime for online grocery shopping and home delivery due to high technology adoption rates and areas of high population density. In 2000, Tesco was quick to respond to this opportunity, adapting their business model by establishing an online grocery channel, \u2018Tesco Direct\u2019 (Exhibit 1) [2]. By 2006, online sales were rapidly growing (CAGR of 23%) and in order to meet fulfilment demands, Tesco augmented their operating model by investing in \u2018grocery dotcom centres\u2019 [3], warehouses solely for online order fulfilment purposes equipped with innovative \u2018goods to person\u2019 picking technology (Exhibit 2) [4]. In 2011, to offer further convenience to customers and to improve business model profitability through lowering home delivery costs, Tesco led the competitive pack by offering an omnichannel \u2018click and collect\u2019 function, whereby customers placed orders online and collected bagged groceries at a collection point of their choice. Despite revenue upside, the shift to a \u2018bricks and clicks\u2019 omnichannel offering came with challenges for Tesco\u2019s operating model: heavy investment in development of an online platform, investment in \u2018grocery dotcom centres\u2019 (approximately \u00a31.5-3.5M per warehouse) [5], investment in a home delivery labour force and supply chain ordering difficulties due to inaccurate forecasting of online grocery orders given a lack of historical data.<\/p>\n
Exhibit 1: Tesco Direct online website [2]<\/em><\/p>\n \u00a0 Exhibit 2: State of the art goods-to-person picking technology [6]<\/em><\/p>\n To improve the efficiency of Tesco\u2019s operating model, Tesco invested in digital in-store initiatives. \u2018Scan as you shop\u2019 handheld devices (Exhibit 3) and self-check-out stations (Exhibit 4) were placed adjacent to the usual employee manned check-out stations to provide customers with the technology to perform the check-out function without involvement from Tesco employees [7]. From a business and operating model perspective, this results in efficiency cost savings as fewer employees are required to perform manual check-out [7]. However, self-checkout has not come without challenges \u2013 the lack of employee supervision has led to significant levels of fraud for Tesco (approximately ~\u00a38M per year) [8]. Tesco is combating this thievery through digital receipt technology and specialized cameras at self-checkout stations to alert staff real-time to \u2018irregular\u2019 customer scanning activity [8].<\/p>\n Exhibit 3: Scan as you shop handheld device [9]<\/em><\/p>\n Exhibit 4: Self Service Checkout [10]<\/em><\/p>\n In addition, in-store video cameras, such as the \u2018broccoli cam\u2019 (Exhibit 5), detect when fruit and vegetable trays in the fresh foods aisles are depleted, sending instant messages to the shop-floor employees for immediate replenishment [7]. Electronic shelf-edge labels (Exhibit 6) circumvent the need for Tesco employees to change 5-10 million paper labels monthly, freeing up valuable employee time to focus on serving customers [7, 11]. Moreover, electronic shelf-edge labels allow for instantaneous price-changes throughout a given day, allowing Tesco to implement promotional prices at a moment\u2019s notice. Finally, employees are equipped with portable smart badges which, upon scanning an item, provide employees with information on stock levels and further product details, allowing shop floor employees to answer customer queries live [7].<\/p>\n \u00a0 Exhibit 5: Tesco\u2019s \u2018Broccoli cam\u2019 [7]<\/em> Exhibit 6: Electronic shelf edge labels [7]<\/em><\/p>\n The Tesco Clubcard loyalty scheme tags a unique customer ID to every purchase, resulting in the amalgamation of millions of customer purchasing data points [13]. Tesco leverages big data analytics and algorithms to adapt the supply chain and product offering to purchasing trends, predict future customer purchasing habits and generate personalized online and offline discounts [14]. This has created opportunities for Tesco\u2019s business and operating model as approximately 16.5 million customers subscribe to Clubcard in the UK, driving greater customer lifetime value and loyalty through repeat purchases due to personalized discounts and allowing greater accuracy into forecasting customer demand by region and product category [5]. Moving forward, Tesco needs to leverage smartphone technology to digitally innovate the in-store customer experience by equipping customers with knowledge and personalization in-store. For example, the existing Tesco App could be expanded provide a functionality to help customers locate specific items within superstores and to replace the \u2018scan as you shop\u2019 handheld devices for a seamless digital experience using digital wallets. This could create an operating model opportunity by further decreasing in-store headcount and costs. Finally, Tesco could overcome the difficulties users face scanning barcodes in self-checkout machines by utilizing innovative Toshiba technology which no longer requires barcodes [15].<\/p>\n <\/p>\n [766 words excluding exhibits]<\/p>\n <\/p>\n References:<\/p>\n [1] Planet Retail, www1.planetretail.net\/, accessed November 2016<\/p>\n [2] Tesco Direct website, http:\/\/www.tesco.com\/groceries\/<\/a>, accessed November 2016<\/p>\n [3] \u2018Tesco goes into the darkness\u2019, Retail Gazette, http:\/\/www.retailgazette.co.uk\/blog\/2014\/01\/42030-tesco-goes-into-the-darkness<\/a>, accessed November 2016 [6] Tesco \u2018goods to person\u2019 picking image, \u00a0http:\/\/www.expo21xx.com\/material_handling\/13440_st3_conveyor_elevator\/default.htm<\/a>, accessed November 2016~ [10] Tesco self-check out image, https:\/\/www.engadget.com\/2015\/07\/30\/tesco-automated-checkout-voice\/<\/a>, accessed November 2016<\/p>\n [11] \u2018Tesco is back\u2019, Forbes, http:\/\/www.forbes.com\/sites\/kevinomarah\/2016\/04\/14\/tesco-is-back\/#5839eaca1c64<\/a>, accessed November 2016<\/p>\n [13] \u2018Clubcard built the Tesco of today but it could be time to ditch it\u2019, The Telegraph, http:\/\/www.telegraph.co.uk\/finance\/newsbysector\/retailandconsumer\/10577685\/Clubcard-built-the-Tesco-of-today-but-it-could-be-time-to-ditch-it.html<\/a>, accessed November 2016 Tesco is the leading grocer in the UK, accounting for 25% of all grocery sales offline and 43% of all grocery sales online [1]. In the last 15 years, Tesco has digitally transformed their customer experience, business model and operating model through investments in a state-of-the-art website with click-and-collect functionality, a digitalized in-store experience and a data-driven customer loyalty platform.<\/p>\n","protected":false},"author":2521,"featured_media":14998,"comment_status":"open","ping_status":"closed","template":"","categories":[],"class_list":["post-14993","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-rctom\/assignment\/digitization-challenge-2016\/","yoast_head":"\n![\"tesco1\"](\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/Tesco1.png\")
<\/a><\/p>\n<\/a><\/em><\/p>\n\n
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\n<\/a><\/em><\/p>\n<\/a><\/strong><\/p>\n
\n<\/a><\/em><\/p>\n\n
\nWhat additional steps Tesco should consider implementing?<\/u><\/p>\n
\n[4] \u2018Insight supermarkets dark stores\u2019, The Guardian, https:\/\/www.theguardian.com\/business\/shortcuts\/2014\/jan\/07\/inside-supermarkets-dark-stores-online-shopping<\/a>, accessed November 2016
\n[5] Tesco annual report, https:\/\/www.tescoplc.com\/media\/264194\/annual-report-2016.pdf<\/a>, accessed November 2016<\/p>\n
\n[7] In-store innovation at Tesco, Tesco PLC presentation by CIO Mike McNamara, https:\/\/www.youtube.com\/watch?v=noa4SmYhjTA<\/a>, accessed November 2016
\n[8] \u2018Tesco trials digital receipts and self scanner tech that aims to reduce theft; Marketing Week, https:\/\/www.marketingweek.com\/2016\/10\/21\/tesco-trials-digital-receipts-and-self-scanner-tech-that-aims-to-reduce-theft\/<\/a>, accessed November 2016
\n[9] Tesco scan as you shop image, http:\/\/www.tesco.com\/scan-as-you-shop\/i\/diagram.png<\/a>, accessed November 2016<\/p>\n
\n[14] \u2018Tesco: how one supermarket came to dominate\u2019, BBC News, http:\/\/www.bbc.com\/news\/magazine-23988795<\/a>, accessed November 2016
\n[15] \u2018New Toshiba supermarket scanner does away with need for bar codes\u2019, Digital Trends, http:\/\/www.digitaltrends.com\/cool-tech\/new-toshiba-supermarket-scanner-does-away-with-need-for-bar-codes\/<\/a>, accessed November 2016<\/p>\n","protected":false},"excerpt":{"rendered":"
![http:\/\/www.tesco.com\/scan-as-you-shop\/i\/diagram.png<\/a>, accessed November 2016<\/p>\n[10] Tesco self-check out image, https:\/\/www.engadget.com\/2015\/07\/30\/tesco-automated-checkout-voice\/<\/a>, accessed November 2016<\/p>\n[11] \u2018Tesco is back\u2019, Forbes, http:\/\/www.forbes.com\/sites\/kevinomarah\/2016\/04\/14\/tesco-is-back\/#5839eaca1c64<\/a>, accessed November 2016<\/p>\n[13] \u2018Clubcard built the Tesco of today but it could be time to ditch it\u2019, The Telegraph, http:\/\/www.telegraph.co.uk\/finance\/newsbysector\/retailandconsumer\/10577685\/Clubcard-built-the-Tesco-of-today-but-it-could-be-time-to-ditch-it.html<\/a>, accessed November 2016\n[14] \u2018Tesco: how one supermarket came to dominate\u2019, BBC News, http:\/\/www.bbc.com\/news\/magazine-23988795<\/a>, accessed November 2016\n[15] \u2018New Toshiba supermarket scanner does away with need for bar codes\u2019, Digital Trends, http:\/\/www.digitaltrends.com\/cool-tech\/new-toshiba-supermarket-scanner-does-away-with-need-for-bar-codes\/<\/a>, accessed November 2016<\/p>\n","protected":false},"excerpt":{"rendered":"Tesco is the leading grocer in the UK, accounting for 25% of all grocery sales offline and 43% of all grocery sales online [1]. In the last 15 years, Tesco has digitally transformed their customer experience, business model and operating model through investments in a state-of-the-art website with click-and-collect functionality, a digitalized in-store experience and a data-driven customer loyalty platform.<\/p>\n","protected":false},"author":2521,"featured_media":14998,"comment_status":"open","ping_status":"closed","template":"","categories":[],"class_list":["post-14993","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-rctom\/assignment\/digitization-challenge-2016\/","yoast_head":"\nTesco: A digital transformation - Technology and Operations Management<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/tesco-a-digital-transformation\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Tesco: A digital transformation - Technology and Operations Management\" \/>\n<meta property=\"og:description\" content=\"Tesco is the leading grocer in the UK, accounting for 25% of all grocery sales offline and 43% of all grocery sales online [1]. 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