Tesco’s response to sustained eCommerce demand

When the UK was plunged into uncharted waters as a result of the introduction of Covid-19 lockdown measures back in March 2020, essential retailers such as supermarkets were immediately placed under enormous pressure. As it became apparent that the global pandemic would substantially curtail people’s daily lives for a lengthy period of time, consumer shopping habits changed dramatically. In the early stages, panic buying was rife, and a range of items including toilet rolls, hand sanitisers, and long-lasting grocery products were being taken off the shelves faster than they could be restocked, causing problems for consumers in getting what they needed.

Then there was the huge shift to online shopping, which has persisted even after the easing of restrictions. Meeting this sudden surge in demand for online home deliveries was a massive challenge in the early stages, especially bearing in mind a number of vulnerable customers were forced into self-isolation and wholly reliant on this service. It was critical that essential retailers adapted to these issues quickly to keep the nation supplied.

It is fair to say supermarkets rose to the challenge admirably, including Tesco, which was able to ramp up its online delivery capacity to over 1 million slots per week from 660,000, a little more than a month after the crisis struck, whilst prioritising the vulnerable and elderly.

In a session at the Virtual AI Summit during London Tech Week 2020, Guus Dekkers, chief technology officer at Tesco, explains how this transformation was able to occur. “In the retail and grocery industry we’ve seen probably more change in the last handful of months than we’ve seen in the last couple of years, and we all as an industry have been forced to adapt and find ways of continually serving the nation and making sure that we give everyone access to food,” he says.

Initially, Tesco undertook a major recruitment drive, remarkably employing over 35,000 staff in the space of 10 days, primarily in roles to support its eCommerce function, such as pickers and drivers. Dekkers highlights the importance of technology to undertake this endeavour in such a short space of time. He outlines: “From a tech perspective how do you make sure you get in contact with candidates, how do you allow them to demonstrate their interest that they want to work for Tesco, how do we on-board them, how do we make sure by the end of month you’re capable of taking on the additional colleagues?”

Many of these staff were employed on a temporary basis to help manage the backlog of online orders, but with consumer behaviour continuing to shift to digital, the retailer announced last month it is creating 16,000 new jobs to support the permanent growth of this channel, including 10,000 pickers and 3,000 delivery drivers.

But a sustained expansion of eCommerce requires more than just new staff – the whole supply chain infrastructure must also be ramped up to sustain it over the long-term; in particular, more warehouse space and distribution centres. Dekkers gave details on a number of new automated urban fulfilment centres (UFCs) it is building in excess space of some of its larger supermarkets for this purpose, one of which is set to go live shortly. Two more are planned to open this year, and at least 10 more are targeted for 2021.

These micro UFCs are “substantially smaller than any traditional automation and warehouse we might know” and underpinning this is the idea that “it is important we fulfil our orders as close to our customers as possible”. Dekkers adds: “Through this automation we are capable to increase both the volume of orders we can deliver from such a store, we can be more cost-effective, and it helps enable us offer services like 10-day delivery, delivery in the next hour etc. and enhance click & collect capabilities.”

Dekkers also acknowledges this is likely to be far from the last innovation Tesco will need to embrace in the context of a rapidly evolving and uncertain retail landscape. He outlines three main trends that he expects retailers will need to respond to over the coming months and years. The first, unsurprisingly, is the growing popularity of eCommerce. “The shift to online is unstoppable, and we all need an answer to make that sustainable,” he notes.

Another is a move away from cash – both digital via online channels and contactless in stores – partly over fears of spreading the virus via cash or touchscreen methods. Dekkers comments: “There has been a massive shift and that immediately influences the way you shape some of your interactions with the customer in the store.”

Finally, due to a growth of membership and loyalty schemes, Dekkers believes it is more important than ever for retailers to find new ways of rewarding their most loyal customers. A number of retailers have brought in revamped and digitalised loyalty programmes during recent months, including M&S and Lidl.

The retail environment continues to change around us, and many supermarkets, including Tesco, have risen well to the initial changes in consumer behaviours brought about by the Covid-19 crisis. A similar attitude has to be maintained over the long-term, as we head into a more digital and tech based age of retail.