Every Little Helps – Sir Terry Leahy

Former Tesco CEO Sir Terry Leahy explains why we should all be optimistic about the future of retail

Once boasting record annual profits of £3.1bn and sales of £1bn a week, Tesco’s grip on the international market is probably more effectively described in layman’s terms – it pockets £1 for
every £8 spent on the high street in the UK. Recently however, the supermarket conglomerate – now operating stores in 14 countries across Asia, Europe and North America – posted a 1% fall in UK profits to £2.5bn, the first fall in two decades. Its reaction, claims former CEO Sir Terry Leahy, has been to drive even more firepower into its aggressive consumer-facing operations, pledging £1bn in a revamp and rehire process. And the departed chief, who drove the multinational forward for 14 years, feels the biggest successes are still to come.

Firstly, I don’t think anything is going ‘wrong’, as such. As a business, Tesco’s sales are growing well. We’ve had a recession since 2007, and it’s understandable that no business is going to come through that unscathed. Tesco has had to batten down the hatches through that period. It’s very sensible that when we start to see some kind of recovery in the economy, the business holds back its profits growth for a while, to invest ahead of that recovery with better shopping, more staff and better services. It seems a sensible thing to do

Following the demise of high street retailers Blockbuster, Comet and HMV, Liverpool bred Leahy – the man credited with elevating Tesco from being third biggest UK retailer to the third biggest globally – believes physical retail is undergoing a massive shift.

Despite the current negative trend, physical retailing will always maintain a dominant presence,” he says. “People want to see what they’re buying and want to try stuff for themselves. The internet can only take us so far, because human beings are social, and they don’t want to spend their lives staring at a computer screen. True, we do need to improve the social component of high street, because the internet is incredibly sociable. So it’s a case of replicating the good points from the worldwide web and reinventing those

And the evidence is there – Costa Coffee instore in Tesco’s, Starbucks franchises set up in leisure centres, and the internet itself now available in endless shops and eateries.

It’s going to be all about inviting innovation onto the high street and into retail outlets – maybe not in the traditional form, but there is certainly room for other retailers, other businesses. We don’t need to be afraid of the internet; we need to embrace its good qualities and reinvent them in physical retail

Resigning from the board of Tesco in March 2011, much of Leahy’s success stemmed from the introduction of the Club Card, a tool which analysed consumer spending behaviour, patterns and trends. In addition, his ground floor approach and close relationship with the shop floor is also credited to Tesco’s rise in fortunes, something he discusses at length in his recently published book, Management in 10 Words.

When I was at Tesco, I spent a week each year working as shop floor staff member. I found that imperative for being able to run Tesco from the ground up. Doing something is more important than watching it being done and by being at the heart of it I got a sense of how well the organisation was working – right the way from manning the checkouts to filling the shelves and working the nightshift. Any business leader needs to truly get a sense of which rules and systems are working and which are not working well, and that means getting their hands dirty. People were suspicious at first, but my reason for going to the stores wasn’t to inspect them; it was to meet the staff. And my own experience on the shop floor – my first job back in Liverpool when I was a youngster – certainly helped in the fact I could really relate to the staff. I don’t think it would have been the same if I’d gone to Eton!

While the industry experiences a mass critical phase, Leahy remains confident for the prospects of large corporations and small businesses alike.

There’s a lot of focus on the negative, when the positive should be grabbing the spotlight. The ethical vote is firmly with small retailers now, and that should protect them going forward. And as for the major forces, well, it may not be fashionable to applaud them, but we should be celebrating their successes too. People rely on these companies for millions of jobs, and we all enjoy the value they give us. Look at Amazon – an amazing business and still growing fast. CostCo do great work, then look at H&M from Sweden, Zara from Spain – they’re very exciting new ones, and I’m enjoying watching their growth and development. Many lessons can be learned and this is now a global business information exchange. We live in exciting times.

Sir Terry Leahy’s book, Management in 10 Words, is out on 7 June, RRP £20.00.