Retailers and suppliers need to start planning for the recovery now with signs that consumer confidence in the UK is starting to return, Tesco chief executive Sir Terry Leahy said today (11 June).
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Speaking at a conference held by the British Retail Consortium in London, Leahy argued that consumer confidence is “seeping back” and that businesses needed to act now to ensure they prosper when the UK economy moves to recovery.
“Confidence is slowly seeping back, helped by lower interest rates, energy and fuel deflation, and of course falling food prices,” Leahy said.
“You should all be thinking about recovery now. All of our businesses are tankers that take time to turn. It’s very important they are not looking in the wrong direction in 2010 and 2011.”
However, the Tesco boss acknowledged that trading conditions remained tough and that there is no guarantee the UK economy will enjoy an imminent recovery.
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By GlobalData“This is my third recession at least and actually several more outside of the UK but this is the toughest,” Leahy said. “I’m not going to try and predict the length and depth of the recession. The situation in the High Street is very fluid at the moment. Clouds remain – the darkest, of course, being unemployment.”
For Leahy, rewarding customer “loyalty” is central to businesses surviving the downturn and thriving when the economy recovers.
Value had become a key concern for UK consumers during the downturn, Leahy said. However, he argued that those businesses that “reward the search for value” would be best placed to hold onto consumers during the recovery.
Leahy pointed to Tesco’s latest GBP150m (US$248.8m) investment behind its Clubcard loyalty scheme. “The right response is to reward [consumers’] search for value but also to reward loyalty. If hard-pressed consumers are going to ever-greater lengths to find bargains, retailers also need to reward those customers who actually stay with them and stay consistent in their behaviour.”
The Tesco chief executive also argued that an economic recovery will see the return of “long-term challenges” including climate change and rising populations.
“We need to keep an eagle eye on these trends. Consumers’ desire to go green hasn’t disappeared and will re-emerge with even greater prominence during the recovery,” Leahy said. “As consumers become still more aware of these issues, they will reward companies that are green and that offer more green products and services and give them a leadership on moving to a low-carbon future.”
