Tesco kills of its Giraffes to focus on the core
Tesco's sale of the Giraffe restaurant chain was finally confirmed today in this report on BBC News. It comes three years after a post I wrote on the acquisition by former CEO Philip Clarke: "Tesco's Giraffe buying is a distraction from their core. I wouldn't be surprised if in a couple of years they have sold the chain."
1. Solve a customer problem, not a company problem
The problem with the Giraffe acquisition was that it solved a Tesco problem, of too much excess retail space, rather than being based on a true customer insight. The BBC's Emma Simpson sheds light on this flawed strategy, recounting a guided tour of a new look Tesco in Watford three years ago, with former CEO Philip Clarke. "It was, he said, the future of the hypermarket and encapsulated his vision of what to do with all that excess space. Giraffe was a key part of his strategy to try to pull shoppers in." The vision in question was to open Giraffe branches in or near Tesco stores to turn them into "retail destinations", as reported here. However, a little bit of customer research would have confirmed that Tesco was never, ever going to be a retail destination. The strength of Tesco, during its many years of high performance, was being a quick, efficient, affordable place to get your shopping done. This helps explain why only three Giraffes were ever opened inside stores during the three years Tesco owned the business.
2. Re-focus on the core
The risk with the Giraffe acquisition was that it was a "new toy" that distracted attention from the main challenge Tesco faced and still faces: a long over-due rejuvenation of the core customer experience, as I posted on here, back in 2012. The issue here is not just about the money invested in Giraffe, which was small in the big scheme of things. Its also an issue of what I call "Return on talent": where senior management is investing their time and effort. As the BBC article says, with the sale of Giraffe "the focus now is very firmly on revitalising Tesco's core UK business, a sector where the going is tough."
3. A symbol of change
Strategy is not just about what you do, its also about what you DON'T do, and what you cut. And Dave Lewis' decision to sell Giraffe sends a strong signal to people inside the business and to analysts. It demonstrates with action, not just words, that Tesco is re-focusing on its core business. I expect the next step in re-focusing on the core will be the sale of upmarket coffee shop, Harris + Hoole, another piece in the doomed vision of making Tesco a retail destination. Tesco recently took full ownership of this business, but "insiders believe that represented a tidying-up exercise ahead of a likely attempt to offload it", according to this source.
In conclusion, Tesco's ill-fated expansion into the restaurant business is a stark reminder of the risks of poorly thought through brand stretching and the need to focus on building and growing a strong core.