Every Little Helps According To Tesco…
The papers were full of bad news about Tesco’s £6.4 billion trading losses yesterday. It seems that poor old Tesco’s are being vilified by the media over everything from dodgy accounting practices to lack of customer loyalty. But what they’re all ignoring is the rather seismic shift that is actually going on inside Tesco’s who are moving away from a value in their bricks to a value in their clicks to repair the balance sheet.
Let me explain…..
Tesco’s have written off millions on their land bank and property portfolio values and sought to replace part of those £6.4 billion losses by selling off their intangible but highly valuable asset – their database in the Clubcard scheme and the associated data!
A few years ago, Tesco set up a subsidiary called Dunnhumby, which in turn set up the well known Clubcard scheme. Dunnhumby has now created other similar databases. Now as many of you are aware, the Clubcard scheme is impressive. It not only has extensive reach (and many of you reading this will be members and use your cards regularly), but in addition to that, the consumer buying patterns it reveals to Tesco’s are a well guarded secret. Tesco’s doesn’t sell the individual client data to third parties, and keeps it’s considerable landscaped buying data very much to itself and for the benefit of Tesco’s. Using this type of data Tesco will know exactly when to buy strawberries, how many are sold and to whom and when. This kind of data mining and mapping is hugely valuable in today’s economy. It minimises stock losses and allows Tesco’s to buy accurately and effectively every day and for every separate store.
It is for these reasons that Tesco’s have invited expressions of interest for the sale of Dunnhumby for around the £2 billion mark!
From our perspective this is a very interesting development – but is it selling off the crown jewels to atone for business mistakes in the past? According to Lord Hoskins the former Chairman of Northern Foods, Tesco’s has failed to innovate of late, hence its current demise. That may be true. Clearly there’s a lot there to fix, but Tesco’s still have 29% share of the food retail market, so they’re a long way from going bust just yet.
Perhaps the really smart thing to do would be to licence some of the data out to multiple licensees who could use the carved up data to their own ends without actually owning the company. In my view that would probably be the most lucrative and smartest move. Let’s see if the new executive Dave Lewis just makes a one off sale or whether he licenses off the parts to make a greater sum in the longer term than selling the whole database now. Here at Virtuoso Legal, we’d be happy to help to advise!
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