Let us analyse this bold step by Pick n Pay with a critical eye and lay bare all the machinations of this appointment at such a crucial time in the group's history.
Brasher is British, who obviously knows his onions from his sausages in the supermarket retail business, having been a member of Tesco for 26 years. He has seen the business and the economy around it change in leaps and bounds over those 26 years, to what it is today. Competitors have come, gone and grown, as the economic and consumer landscape changes.
This week, Tesco announced poor financial results yet again. This follows the announcement in January this year, when Phillip Clarke, group chief executive, gave the first profit warning for Tesco in 20 years. In March 2011, Richard Brasher had been appointed as CEO, with Clarke announcing that he was "the best man for the job" and that he would allow Brasher "the space to steer his own ship"!
This has a hint of familiarity somewhat according to one analyst in South Africa, who believes Brasher should be allowed to lead Pick n Pay unhindered, with as little interference as possible. The consensus on Brasher by industry analysts is that he did a good job in steering Tesco during a very difficult time in consumer spending. However, it is rumoured that Clarke has put the blame of the group's poor performance on Brasher's 'Big Price Drop', which he considered too costly and ineffective, thus eating away at profit margins whilst not contributing to the company's competitiveness in a highly volatile retail environment.
Nevertheless, Brasher has done well over the years, having led the company's global expansion prior to his appointment. The group's poor performance, however, for two quarters in a row, created tension between Clarke and Brasher, as the former took on a more hands-on role in operations.
There is no doubt that in tough economic times, discounting is the way to grow share. The consumer during times of recession is looking for a 'deal'. How this offer is delivered, however, is key to consumer perceptions. While price discounting will always deliver tactical objectives, ultimately, consumers are swayed by the perception of 'value'. This perceived value must be delivered at a relevant time with a relevant message that captures the entire experience of the consumer. The role of the retailer is to create a memorable and compelling 'brand experience'. This creates brand affinity and loyalty, rather than tactics that create purely rational rewards.
Tesco's competitors, mainly Sainsbury's and to a lesser extent, Marks & Spenser (M&S) Foods, Morrison's etc. have managed to hold their own, in spite of targeting the same cash-strapped consumer in the same recession-dogged environment. Sainsbury's has managed to reinvent itself over and over again, tapping into consumer expectations and demand for complete brand experience. It has been extremely successful in creating the perception of value, as opposed to discount.
Tesco's role as the 'consumer's champion', has been outlived by a new type of consumer, whose demands go far beyond the need to satisfy rational needs. It is about finding a connection with consumers that goes beyond 'price discounts' (which are significant in themselves in today's recessionary environment). However, a more profound value proposition is needed, backed by a strong people orientated (as opposed to shareholder focussed) delivery mechanism. This needs to start from employees to consumers and society.
Brasher will be coming into Pick n Pay with some baggage. This is inevitable, because people either do things as they have always done them, or else make a paradigm shift, regroup and reconvene with a different strategy. It all depends on their ability to re-invent themselves and whether the environment is conducive to adopting new ideas. Is Brasher therefore, going to implement 'Tesco style' strategies for Pick n Pay, or is he going to recognise that South Africa might be halfway across the world from his native UK but the consumer is just as discerning, just as cash-strapped and competition just as tough?
In recent times, Pick n Pay has not delivered on its consumer promise. It has been overtaken by Shoprite Checkers in financial performance, partly due to failing to keep up with consumer expectations. Woolworth Food has used the M&S model to good effect, providing value, while maintaining aspirational brand affinity. It is limited in terms of its offering, but what it does offer, delivers on the promise. Product innovation is also the cornerstone of the 'Woolies promise'.
What then is Brasher going to do about Shoprite and Woolies? He might have to start with a new value proposition and perhaps refurbishment of stores, investment in staff training, product development and innovation and well-coordinated merchandise logistics. Consumer insights are key to staying ahead of trends and re-establishing the brand as a leader in its field. Investment in technology also contributes to 'industry leader status'.
Some analysts have suggested that the customer loyalty programme has been costly for the group. If the loyalty programme is real and delivers, it cannot be faulted. The perception of 'me too' always creates a poor cousin. The group needs to lead and to do that it needs a leader.
