Tesco - Any IT competitive Advantage?

Tesco opened as a grocery stall in 1919 by Sir Jack Cohen with the motto "Pile it high, sell it cheap". The idea was that customers wanted inexpensive products at convenient locations and that volume would drive profitability. By 1960's, their self-service model offered the possibility to lower prices by offering a wider variety and larger volume of stock with fewer employees establishing Tesco's reputation as a value-for-money retailer of groceries. By the late 1970s, Tesco decided to concentrate on the larger out-of-town superstore format, offering a wider range of goods in a more spacious and lighted environment with emphasis on customer service. Tesco slowly computerized its checkout systems and in future years used IT to gain a huge competitive advantage.

Tesco and IT competitive advantage:

• The Tesco Clubcard was the UK's first supermarket loyalty program introduced in Feb 1995. This program cost Tesco £300 million over the first three years. These costs included an update to the point-of-sale (POS) technology and the supporting computer systems to handle the Clubcard information, and a call center in Dundee to handle the anticipated calls per week. Within six months of the Clubcard introduction, Tesco had increased its share of the retail grocery trade from 15% to 18%. By, 1996, Tesco had  over eight million Clubcard customers who were purchasing 200 million in-store purchases per day. This program coupled with IT provided excellent competitive advantage to Tesco and made it the number one retailer in the UK by 1996.
• The Clubcard gave Tesco a unique insight into the shopping habits of its customers. It could adapt itself and cater better to the different needs of its consumers by analyzing the customer's billing data when they shopped using their clubcard. This is possible only by the use of a sophisticated IT system.
• With the Clubcard, Tesco discovered that about "38% of their customers cared about price, based on 700 products where price was important". The analysis suggested that most of the benefits of the reduced prices were going to customers who only shopped at Tesco during the promotions. They used their own IT systems to conduct market research and to understand consumer buying patterns and invested heavily on price strategies.
• Tesco was able to refine the loyalty program further by knowing what customers were regularly buying. They used the information supplied by the Clubcard to concentrate marketing expenditures on its regular customers rather than on advertising spots on television. That was the range to which IT helped them target their consumers. With the additional information submitted to the Clubcard help line (e.g. diabetic dietary requirements and lifestyle choices), Tesco was able to create 5,000 customer "needs" segments, with each segment receiving personalized vouchers and 24 different varieties of the Tesco magazine providing specific offerings for Clubcard customers.
• By 1998, Tesco provided its 8 million consumers with personalized letters with points-based vouchers and a Clubcard magazine designed and produced to fit their stage in life with 80,000 variations. To better handle the volume of Clubcard information, Tesco invested in the NCR Teradata data warehouse to provide a 360º-view of its customers.
• In 1996, Tesco launched the Clubcard Plus telephone account which allowed members to make monthly direct debit payments to Tesco for groceries. A new joint venture company, TPF was started in alliance with Royal Bank of Scotland which provides savings accounts, motor insurance, life assurance, loans, pay-at-the-till travel insurance, credit card services, and tax free savings and investments. TPF has 2 million customers (400,000 savings accounts and 900,000 credit cards) who make 80% of their transactions through the stores.
• During 1996, Tesco made a modest investment in a few Dell servers and Microsoft BackOffice and brought retail shopping to the Web with its Tesco Direct service. Tesco provided different online services like price check,  and also included financial services, where customers could trade shares and interact with their Clubcard Plus account; a shopping service that remembers a customer's last shopping list; and many online features all supported by an extensive help facility that thoroughly answered all customers' questions. By 2001, Tesco.com had successfully proved its model and added the number one e-grocer on the Web title to its UK title.

By investing in IT from an early stage, Tesco gained huge competitive advantage. It became the number one retailer by 1996 and the number one e-grocer by 2001. I believe, these successes are a result of keeping pace with the IT development.