Tesco Business Model Canvas

Tesco maintains crucial financial services partnerships, even after divesting its core banking operations. These alliances are vital for offering a range of financial products, including insurance and money services, to its customer base.

A notable example is the five-year pet insurance contract established with Barclays, which significantly boosted Tesco Bank's adjusted operating profit in 2024/25. This partnership highlights the strategic importance of income generated through these collaborations.

Tesco's key partnerships are vital for its operational success and customer engagement. These include a broad network of suppliers ensuring product availability and quality, technology and logistics firms enhancing efficiency, and financial service providers offering value-added products. The Clubcard loyalty program also thrives on strategic alliances with diverse reward partners, significantly boosting customer retention and spending.

A core activity for Tesco is the seamless operation and ongoing expansion of its online grocery delivery service. This encompasses managing the digital platforms where customers shop, ensuring efficient order fulfillment from stores or dedicated centers, and orchestrating the crucial last-mile delivery to customers' homes.

Tesco is also actively developing and promoting rapid delivery options, such as its Whoosh service, to cater to immediate customer needs. This requires sophisticated logistics and inventory management to ensure speed and reliability.

The company's commitment to e-commerce is evident in its performance metrics. In the year leading up to early 2024, Tesco reported a substantial 10.2% growth in its online sales. Furthermore, the average value of online orders has also seen a healthy increase, rising by 10.8% year-on-year, indicating customer confidence and increased basket sizes in the digital channel.

Tesco's key activities revolve around managing its extensive retail operations, ensuring efficient supply chain logistics, and fostering customer loyalty through programs like Clubcard. The company also prioritizes product innovation and development to meet evolving consumer demands.

In 2024, Tesco continued to invest in its online capabilities, with online sales showing robust growth. The Clubcard program remains central to its strategy, with a high penetration rate among shoppers, providing valuable data for personalized marketing. Product development saw over 1,000 new launches and improvements to existing lines in the 2024/25 fiscal year.

Tesco's advanced technology and data systems are critical to its operations, particularly its robust e-commerce platforms and sophisticated logistics. These systems enable efficient inventory management and timely delivery, ensuring a smooth customer experience.

The company's Clubcard program is a cornerstone, providing invaluable data insights. This data allows Tesco to understand customer preferences deeply and execute highly personalized marketing campaigns, driving customer loyalty and sales.

The Tesco app, a key digital touchpoint, boasts 18 million users, reflecting a significant 12% year-on-year growth. This widespread adoption underscores the effectiveness of their technology in engaging customers and facilitating convenient shopping.

Tesco's extensive store network, comprising around 3,700 UK locations by fiscal year 2024, is a primary physical asset. This network is continually optimized through investments in new openings and refurbishments, ensuring broad customer accessibility and an enhanced shopping experience.

The Tesco brand, synonymous with trust and value, is a critical intangible asset, fostering strong customer loyalty. This reputation was further bolstered in 2024 by positive customer survey results across key metrics like value for money and satisfaction.

Advanced technology systems, including robust e-commerce platforms and efficient logistics, are vital operational resources. The Clubcard program, with its 18 million users and 12% year-on-year growth in app adoption, provides invaluable customer data for personalized marketing.

Tesco's skilled workforce is a key resource, supported by significant investments in colleague well-being and competitive pay, with hourly rates rising to £12.04 in London and £11.44 elsewhere from April 2024. Strong supplier partnerships ensure product availability and quality, with ongoing efforts to enhance supply chain efficiency and ethical sourcing.

Tesco excels in convenience by offering a vast store network, from large supermarkets to smaller convenience formats, ensuring customers can find what they need nearby. This physical presence is complemented by robust online shopping capabilities, allowing purchases anytime, anywhere.

The company's commitment to accessibility is further highlighted by its rapid delivery services, like Tesco Whoosh, which aims to deliver groceries in as little as 15 minutes. This caters to immediate needs and busy lifestyles, making grocery shopping seamless and adaptable to customer preferences.

In 2023, Tesco reported that its online sales continued to grow, representing a significant portion of its total revenue, underscoring the success of its digital and omnichannel strategies in meeting customer demand for convenience.

Tesco's value proposition centers on providing accessible, high-quality products through competitive pricing and loyalty programs like Clubcard. Their extensive product range, coupled with convenient shopping options and a strong commitment to sustainability, further enhances customer appeal and fosters long-term loyalty.

Tesco prioritizes a positive in-store experience, focusing on friendly staff and efficient service to maintain high customer satisfaction. This commitment is reflected in their 2024/25 customer satisfaction levels, which stood strong at approximately 86%.

Tesco's customer relationships are deeply rooted in its Clubcard loyalty program, which has achieved an 84% penetration rate in the UK, fostering strong customer engagement through personalized offers and data collection.

In 2024, Tesco leveraged this data to drive personalized marketing, leading to increased basket sizes and repeat purchases, exemplified by tailored offers for specific customer segments.

Beyond digital engagement, with 18 million users on its app experiencing 12% year-on-year growth, Tesco also prioritizes in-store experience, maintaining approximately 86% customer satisfaction in 2024/25.

Community initiatives, such as redistributing 22.7 million meals to charities in the year ending February 2024, further strengthen customer loyalty and brand perception.

Tesco Whoosh is a key component of Tesco's strategy to meet immediate customer needs, offering rapid grocery delivery. This service has seen significant growth, with sales nearly doubling in the 2024/25 financial year.

The expansion of Whoosh is evident, now operating from over 1,500 Tesco stores. This widespread availability underscores Tesco's commitment to enhancing convenience and capturing a larger share of the on-demand grocery market.

Tesco’s channels are multifaceted, blending a strong physical presence with robust digital offerings. The extensive store network, numbering around 3,500 locations in the UK as of February 2024, serves as a primary sales driver and customer touchpoint. Complementing this, Tesco.com is a critical online platform, reporting a 10.2% increase in sales in FY 2024/25. The rapid delivery service, Whoosh, is also expanding significantly, now operating from over 1,500 stores to meet immediate customer needs.

Tesco's Retail Media Network is a growing channel, leveraging its 18 million Clubcard members for targeted advertising. This data-driven approach allows brands to reach specific customer segments based on purchasing behavior, aiming to improve advertising effectiveness. The Tesco app, used by a substantial portion of its customer base, further enhances this by facilitating personalized offers and direct brand engagement.

Quality-Conscious Shoppers are a key segment for Tesco, valuing superior products, especially in fresh categories and their premium Finest range. Tesco's commitment to quality is evident in their investments, with the Finest line alone experiencing a 15% sales growth, demonstrating strong customer demand for high-end offerings.

Tesco's customer base is segmented to cater to diverse shopping needs and preferences. Key groups include everyday shoppers focused on value, convenience-seekers prioritizing speed and ease, and quality-conscious individuals who seek premium products. Additionally, a significant portion of Tesco's customer base consists of loyal Clubcard members who benefit from personalized offers, alongside a growing segment of digitally engaged shoppers who prefer online purchasing.

Tesco's property and store operations represent a substantial portion of its cost structure. This includes expenses for rent across its vast network of supermarkets and smaller stores, as well as significant outlays for utilities like electricity and heating. Maintenance and ongoing repairs to ensure store functionality and appearance also add to these operational costs.

The company's commitment to growth and modernization means continuous investment in new store openings and the refurbishment of existing ones. For instance, in the fiscal year ending February 2024, Tesco reported capital expenditure of £1.7 billion, a portion of which was allocated to store development and improvements to enhance the customer shopping experience.

Tesco's cost structure is dominated by its Cost of Goods Sold (COGS), which stood at £47,440 million in the fiscal year ending February 24, 2024. This reflects the immense scale of its inventory procurement. Employee costs, including wages and benefits, are also a substantial expenditure, with ongoing investments in colleague pay to attract and retain talent. Property and store operations, encompassing rent, utilities, and maintenance, represent another significant outlay. Furthermore, logistics and distribution costs, particularly for its growing online business, are critical to its operational efficiency.

Tesco Bank continues to earn revenue from its financial services, even after selling its core banking operations. This includes income from insurance products and various money services offered to customers.

In the first half of the 2024/25 financial year, this segment reported an adjusted operating profit of £94 million. This figure incorporates certain non-recurring items, providing a snapshot of the segment's profitability.

Tesco's revenue streams are diverse, encompassing core grocery sales, general merchandise, clothing, financial services, and fuel. Increasingly, the company is also capitalizing on its extensive customer data through its retail media platform.