Tesco’s Neighborhood-Specific London Stores

Tesco Plc (Cheshunt, England) reports it has seen a 10 percent jump in sales since it set up its 450 London stores as a separate business unit. Bloomberg News reports that the British mass merchandiser attributes much of the success to a refresh of 80 stores in the city with a targeted, local focus to lure back customers who have defected to cheaper rivals and neighborhood shops.

Andrew Yaxley was recruited in January from American candy maker Mars Inc. (McLean, Va.) to be Tesco’s first managing director for London, to revive business in its largest market and to create models that can be replicated in the rest of the country.

Tesco has invested $1.6 billion to turn around its U.K. business after suffering its first annual profit decline in almost two decades last year.

Using market intelligence and analyzed data, reports Bloomberg, Yaxley’s team has divided its London stores into on-the-move outlets, which largely serve commuters, and neighborhood shops. These are then further segmented into serving super-upmarket, upmarket, mid-market and price-sensitive customers. After that, Tesco looks at the ethnic make-up of the neighborhoods and decides how to stock each store.

In London’s Upton Park, a neighborhood made up almost entirely of Asian and black residents, many with large families, the retailer is offering large packages of food items that you’d find at a U.S. warehouse store like Costco or Sam’s Club.

 “You wouldn’t think people would buy these on a high street but they do and bring them home on the bus,” Yaxley told a Bloomberg reporter.

The Upton Park store also boasts the first Tesco fresh meat counter that sells fresh Halal products from animals killed in accordance with Islamic law. Sales there have improved 10 percent since the revamp in July, reported Tesco ceo Phil Clarke. The store also devotes less space to alcoholic products than a typical Tesco.

Yaxley said the Upton Park blueprint will also work in other large U.K. cities with multi-ethnic populations, such as Birmingham, Bradford and Glasgow.