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For Shufersal, the leading food retailer operating supermarkets in Israel, it looks like the sky is the limit. This is a message strongly received from the CEO of Shufersal, Itzhak Aberkohen, in a recent interview given to Globes business newspaper (for its annual publication of consumer-based equity-ranking of brands, July 2017). Shufersal is already a major national retailer, but since the collapse and sell-off of the main competing food chain Mega last year the road ahead is clear more than ever for Shufersal to ride on to stardom. The plans presented by the retailer’s CEO are definitely leading in that direction on different fronts.

  • Note: Shufersal has also been known as ‘Supersol’ but it appears that the retailer is moving to suppress that name in favour of enhancing its Shufersal brand name. The original name chosen for the retailer almost sixty years ago was composed by joining two words: ‘Shufra’ from Aramaic meaning excellent and ‘Sal’ which means basket in Hebrew. The retailer founded the first modern American-style supermarket in Israel in Tel-Aviv in 1958. Israelis frequently name the retailer ‘Supersal’ or ‘Shufersal’. The official choice of ‘Shufersal‘ by the company should make the consumers happy while remaining as true as possible to the legacy name.

The retailing company Shufersal operates over 270 stores. They are divided into multiple sub-chains of different store formats, designed to target different consumer segments or accommodate distinct shopping situations or goals. Three main sub-chains are: “My Shufersal” (the core sub-chain of ‘classic’ supermarkets in neighbourhoods); “Shufersal Deal” (large discount stores); and “Shufersal Express” (small convenience stores in neighbourhoods). Like most food chains, the stores offer in fact not only food and drink products but a larger variety of grocery and housekeeping products, and may sell as well toiletry or personal care products. Shufersal operates in addition a channel for online or digital shopping. It also has its own brand of products carrying the retailer’s name. The CEO seeks to enhance the company’s capacities in these domains, and then extend further. An important aspect in his plan is the digital transformation of the company’s retail operations and services.

  • Note that supermarkets in various countries may selectively add in different times and locations other product ranges (e.g., books and magazines, electric home equipment, housewares).

Shufersal is now on the verge of making a strategic entry into the field of ‘pharma’ retailing with the acquisition of New-Pharm, the second-sized pharma chain in the country. The food retailer already sells toiletry products in its stores, as indicated above, but it has no access to cosmetics (e.g., perfumed lotions, make-up) and non-subscription medications (via pharmacy departments). Taking over New-Pharm would provide it with this capability through the pharma-dedicated and licensed stores. The dominant leader in pharma in Israel is Super-Pharm, which gets the respect of Mr. Aberkohen as a successful and highly professional retail competitor in that field. Shufersal should be able to get better terms for purchasing toiletry products for its supermarkets and other stores, but the addition of cosmetics and pharmaceuticals seems less fitting its current line of business. It makes sense if the retailer had department stores where one of the departments would sell cosmetics, but that is not the case of Shufersal; it would probably have to operate the pharma stores separately. Undertaking the responsibility of operating pharmacies could create even greater complications that may outweigh the benefit of margins from selling OTC medications, nutrition supplements and other devices.

The deal is still awaiting approval of the antitrust supervisor by the end of August 2017. The main obstacle comprises 6-8 flagship stores that the supervisor may not allow the food retailer to have. Aberkohen has said in the interview that the acquisition of the pharma retailer would not be worth it without those stores. There could be additional restrictions due to vicinity of “Deal” stores and “My” supermarkets to some New-Pharm stores.  Aberkohen believes that the increased variety and assortment of toiletry products the company will be able to sell together with the new categories will make an important contribution to its sales potential but will also create a more balanced competitive challenge against Super-Pharm (i.e., as two equivalent retail powers) that will benefit consumers in personal care and grooming. The suppliers are concerned, however, that the bargaining power of Shufersal will become significantly, perhaps exceedingly, stronger in toiletry, and that the retailer will link the trading terms for their presence in New-Pharm stores with presence of their products in the Shufersal stores (Globes [Hebrew], 15 August 2017).

Shufersal’s CEO seems to have little regard for its follower Mega under a new ownership. Most of the chain, neighbourhood supermarkets (“Mega City”, 127 stores), was bought from a holding company (“Alon Blue Square”) in a rather bad state by a medium-sized food retailer of discount warehouse-like stores (“Bitan”) in May 2016. Other discount stores were sold and distributed among some smaller discount retail chains. Since then a few more supermarkets of Mega were apparently sold or closed. Bitan has roughly more than doubled the total number of stores in its ownership since acquiring Mega (on a scale from 70-80 to 180-190). Aberkohen argues that Bitan seems to be taking hold of the operation of Mega City but there is still much work ahead to re-organise its whole retail business. Occasional signs in the stores imply that the new owner is still grappling in effort to manage the additional supermarket chain. There will also come a time to deal with the effort and redundancy of keeping two unconnected brands of the two sub-chains of discount stores and supermarkets (“Bitan Wines” and “Mega City”, respectively).

Mr. Aberkohen has no greater regard for the other discount food retailers (the more familiar and popular of them is “Rami Levy” with 44 stores, increasing by 10 stores in the past year). In his view, Shufersal does not consider itself as opposed to Rami Levy or the other players; it is engaged in its own plans and mission with a focus on innovation. A key to success in the long-term, in his opinion, is an emphasis on managing existing (‘same’) stores and innovation, not adding more and more floor area. He thus maintains that while the competitors, particularly Bitan/Mega, are so busy handling the additional space in new stores, Shufersal will have the time it needs, as a window of opportunity, to create innovation (e.g., Internet, robotics) and gain an advantage of 3-5 years ahead.

  • So far consumers have not gained in terms of cost of shopping from the deal of selling Mega. According to Israeli business newspaper “Calcalist” there are worrying signs to the contrary. Mega under its new ownership has not been pressuring prices downwards (attributed to financial obligations of its owner Nahum Bitan), and Shufersal that had identified this weakness, took the opportunity to raise prices in its stores while gaining in bargaining power vis-à-vis its suppliers. A rise in prices (i.e., index of barcoded products) and an increase in sales revenue in the food retail sector (including non-barcoded outlets) point to a change in trend from 2014-2015.

The CEO of Shufersal is looking forward to digital transformation of retailing and shopping experiences, involving innovation both in online self-service customer-facing platforms and in the preparation and delivery of online orders. He expects great advances in the operation of logistic centres where robots and humans will take part in collating products from shelves for online orders and packing them for dispatch and delivery to customers. Three centres are in development. Enthusiastically, he proclaims that the online apparatus will involve a lot of automation, digital (features) and robotics.

Shufersal is clearly adopting the new language of data-driven marketing, Big Data, and digital automation of interactions with its customers-shoppers. The company is said to pull together to that aim its information systems, supply chain, and data pools from its customer loyalty club and club of credit card holders. This will enable it in the future to customise offers and services much better to its customers. Aberkohen talks of providing services to suppliers based on their platform of big data but he may have to think more in terms of collaboration, especially with the stronger manufacturing suppliers (i.e., sharing data on shopping patterns in exchange for support and aid in resources for analysing the data using advanced tools and methods of data science). Aberkohen believes that in the future we will see fewer stores, and smaller ones, due to transition of shoppers to online ordering and direct delivery to their homes or offices (currently online orders account for 12% of sales at Shufersal).

Moreover, the CEO is expecting a considerable expansion in ranges of products the retailer will make available to its customers via online shopping. This will include also orders from overseas (e.g., through partners in the US). He refrains from likening Shufersal to Amazon but is surely getting inspiration from the international online master. It could relate to: (a) A wide variety of products that a retailer can offer on the Internet (besides, Amazon could be getting more deeply engaged in food retailing with the recent pending acquisition of Whole Foods); (b) Employing robotics and humans in logistic centres; and (c) Advanced and dynamic analytics to customise offers to shoppers.

  • The measure of consumer-based brand equity of Globes/Nielsen is based on three key metrics: willingness to recommend, intention to buy tomorrow, and favourability. The top brand of food chain stores is Rami Levi (discount stores). This position may be credited to the personal character and initiative of Mr. Levi and his high media profile (e.g., proclaiming to fight and act for the good of consumers). Shufersal is in the second-best position in the eyes of consumers. The original brand of Bitan is ranked 7th whereas Mega City has fallen down to the ungracious 11th place (one before last).

Shufersal’s own brand currently captures about 20% of total sales. The CEO aims to increase this share to a level of 40%-50% to be in par with similar retail chains overseas. The retailer will have to walk on a thin rope when cutting down purchases of branded products from national manufacturers without ruining relations with them. Shufersal already offers milk, cheese and meat (beef) under its private label (a precedent in Israel), yet the CEO admits they still value and need their relationship with the leading national producer of these food products (Tnuva). In the past Shuferal has also had a bitter battle with another producer of dairy and other food products (Strauss). Other categories in which the retailer markets under its name include baby diapers and milk formulae; the CEO has the full intention to add more product types to this list and expand the shelf space and volume assigned to Shufersal’s own brand. The proposition according to Aberkohen is to bring quality products at value-for-money. Shufersal has taken additional strategic steps in recent years to tighten their control over the display of products in their stores: assigning their own workers to place most products on shelves in-store instead of allowing representatives of suppliers to do so, and bringing-in most products to stores independently from their logistic centres.

The CEO of Shufersal is cognizant that many consumers do not strive to shop in large discount stores that are usually located at the outskirts of cities or in industrial areas. Often enough consumers prefer convenience to lower cost. People who work long hours, including young adults early in their career, and even students, cannot afford the time or pass over the option of shopping in those stores. It may be added that for older consumers (e.g., pensioners), discount stores may simply be out of reach, especially if one does not drive. Supermarkets in shopping malls (so-called ‘anchors’) are also considered by Aberkohen as obsolete. These consumers-shoppers prefer visiting (at least during the week) a supermarket or even a convenience store in their neighbourhood — they are too pressed in time with duties or other engagements to bother about the somewhat higher cost (Mr. Aberkohen brings his own daughter as an example). Nevertheless, if the neighbourhood stores do not work out as a practical option, they will probably order online.

To top the list of the plans of Shufersal’s CEO, he sees the retailer engaged in a variety of peripheral services consumers may like to have at easy reach such as non-banking financial services (e.g., loans), insurance, travel (including holidays abroad), and optometric (eye-glasses). Some of the services are likely to be made available only online (e.g., insurance, travel), next to additional shopping options Shufersal expects to generate. Although Aberkohen does not refer specifically to the mobile channel, it is reasonable that much of what he describes in relation to an online channel is necessarily applicable these days in a mobile channel.

Shufersal’s CEO has high aspirations for the retail company he leads. Aberkohen’s plans may change not only the consumption culture in the country, as he maintains, but also the nature and character of the company itself. Hence, Shufersal’s management will have to watch carefully what areas it is about to enter and how qualified the company is to make those extensions. They will have to consider, for example, how to integrate the business areas of New-Pharm into the portfolio of Shufersal. They should not underestimate the trouble that discount retailers can cause them. Moreover, as Shufersal makes more moves to fortify its retail business, its management must act with sense and sensibility amid tensions that such moves cause, and are likely to continue to cause, with suppliers as well as consumers. The expansion and addition of products and services for the benefit of consumers is a positive venture, but Shfuersal still has to convince them as such, every day.

Ron Ventura, Ph.D. (Marketing)

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‘Disruption’ has become a highly accepted concept in business and management, an event one can only expect to happen at some point in time, whether in production, marketing, distribution and retail, or in other functions of business. Disruptive innovation, mostly technological and digital, can be helpful in fixing market weaknesses due to lack of progress in methods and processes applied by ‘legacy’ companies; operational inefficiencies; and insufficient competition in a market. A disruptive innovator may also succeed by capturing consumer needs hidden or left ignored by existing complacent competitors. But disruptive innovation is not a magical cure; actually, it tends to be quite a radical form of cure. Innovations of this kind have the potential to destabilise a market, create disorder and confusion, and cause dysfunction if the transformation is spiralling out of control, a matter of real concern to all parties involved.

Disruptive innovations have been introduced in various industries or categories of products and services. It often occurs when a technological company imports a method or a tool developed in the hi-tech community into a specific product or service category, whose agents (e.g., providers, customers) are mostly unaccustomed and unready for. Yet the innovation can hit roots if it meets a large enough group of innovative or tech-orientated consumers who welcome the new solution (e.g., a way of acquiring or using a service). Thereafter, incumbent competitors find themselves obligated to adopt, if capable, similar or comparable methods or tools in their own operations. High-profile examples include: (a) Uber that expanded the concept of taxi-rides and ridesharing; (b) Airbnb that disrupted the field of hospitality and short-term lodging (‘home-sharing’ vs. hotels and guest houses); (c) Netflix that altered the habits of television viewing. Also, companies in a new sector of financial technology (‘fintech’) offer digital tools (mobile app-based) for consumers to manage their banking accounts, budgets and investments, challenging ‘legacy’ banks and financial service providers.

Certain technological innovations turn out, however, to be disruptive across-the-board. For instance, online social media networks and digital marketing methods (reliant on Big Data and analytic techniques) have been influencing dramatically how companies approach customers and interact with them in many product and service categories (beyond technological goods or information and communication technology services). Furthermore, developments in artificial intelligence (AI) and robotics promise to introduce even more significant changes, from manufacturing to marketing and retail, and in the functioning of various products (e.g., smart home appliances and devices, the ‘upcoming’ driverless car).

Much damage may be caused if the innovative alternative solution is incomplete or the planning of its implementation is flawed. Overall, everyone should be prepared for a turbulent period of resistance, adjustment and adaptation that may extend until the ‘new-way-of-doing-things’ is assimilated in the market, or rejected. The story of an episode regarding taxi transportation at the international airport near Tel-Aviv exposes how wrongful introduction of a disruptive innovation in this service domain can lead to blunder and service failure. Mistakes made because of flawed planning in a highly sensitive process of market transformation may turn the disruption into a mess-up instead of improvement of the service.

The management of the Israel Airport Authority (IAA) launched earlier this year (2017) a new bid for taxi service operators to ride passengers into and from Tel-Aviv (Ben-Gurion) International Airport. In the end of May the 10-year permit of the primary taxi company licensed to provide service in terminals at the airport expired; the IAA wanted to open the service to competition in expectation that it will lead to fare reduction and perhaps other improvements (e.g., availability, time keeping of taxi journeys).

  • The competition is concentrated in fact on picking-up passengers from the airport; if prohibited, taxi cars will have to return empty after dropping off their former passengers at the flight departure terminal. A primary taxi company was given the advantage.
  • Note: Shuttle or minibus service providers are allowed in addition to take passengers  to more distant cities like Jerusalem and Haifa.

Only two companies responded and participated in the bid: the incumbent service provider (“Hadar-Lod”) and the mobile app company Gett that mediates taxi service. The veteran taxi company has been riding passengers to and from the airport for 40 years. It has definitely developed proficiency in riding air travellers over the years but there were also misgivings about its practices, linked to its status as mostly an exclusive taxi service for individual passengers (alone, family and friends). A few years ago the Ministry of Transport intervened by publishing and issuing a calculator of recommended fares to help passengers ensure they pay fair prices.

Gett (originally GetTaxi, founded in 2010) is managing a network connecting subscribed taxi drivers with passengers through its mobile app. The company is now operating in over 100 cities in four countries (Israel, United States, United Kingdom, Russia). The location-based app facilitates matching between a passenger and a driver, from service ordering, through journey planning and pricing, and concluding with payment via Gett. Unlike Uber, Gett is working only with professional licensed taxi drivers and is not involved in supporting informal ridesharing journeys by unauthorised drivers (e.g., UberPop). The app of Gett is focused on benefits of convenience of ordering (no street hailing, no phone call), efficiency of matching through the network, and of course promising a lower journey cost.

Still, the company hires its subscribed taxi drivers but is not their employer — they divide the fare income between them to the will of Gett. The company is commending itself on its website for higher pay to drivers, in-app tips and 24/7 live support, motivated by the idea that if Gett treats drivers better, they will reciprocate by treating their riders better. However, the arrangement has repeatedly emerged as a source of friction. Gett has changed its name, removing ‘Taxi’ from the title, to allow for extending its brand into a variety of delivery services (e.g., food, parcels) to domestic and business clients.

  • Taxi cars of member drivers in Gett’s network are marked by a label with its logo on the car’s side. Taxi drivers that belong also to a traditional local taxi company (‘station’) may carry its small flag on top of the taxi. However, in recent months taxi cars can been seen more frequently in Tel-Aviv area carrying only a flag of Gett.

The absence of more traditional taxi companies from the bid could be the first sign of a problem. Those companies may have found it not worthwhile for them to commit to provide regular service at the airport. But as a replacement, Gett is not truly a ‘physical’ taxi company and has unique characteristics. It leaves the operation of taxi service by Gett open to much ambiguity. Drivers subscribed with Gett can ‘double’ by riding passengers either via Gett’s app or with a standard taxi meter installed in the car. Are traditional taxi companies ‘hiding’ behind drivers also associated with Gett? But if Gett had the permit, would it allow drivers in its network to take passengers also without its app? (i.e., leave money on the table from such journeys.) Yet, Gett’s drivers have to choose in advance in what periods they act as standard taxi drivers or as taxi drivers riding passengers on call from Gett’s app. This situation could lead to confusion: under what ‘hat’ are the drivers allowed to get in and out of the airport and at what time are they allowed to choose what type of passenger-customer to ride.

Furthermore, the service could be binding and unfairly restrictive for passengers who are not subscribed customers of Gett, especially when arriving from abroad. There could be several reasons for passengers to find themselves in an inferior position: Passengers may not have a mobile phone that supports software applications; they may not feel comfortable and skilled in using mobile apps; or passengers may not be confident in paying through a mobile app (e.g., prefer to pay taxis in cash). It may be hard to believe but such people do exist in our societies in different walks of life. It is also known that smartphone users are selective in the number and sources of apps they are willing to upload to their devices. It could be futile to try to force consumers to upload a particular app, but it would be especially unfair to require users to upload an app of Gett so they can be driven away from the airport. The IAA should have not allowed from start an outcome in which a company of the type of Gett becomes a single provider of taxi service at the airport, primarily for riding returning residents or visiting tourists (the latter may not even be aware of Gett beforehand). The ‘disruption’ would have actually become a distortion of service, leaving customers either with no substitute or with confusion and frustration.

But something else, awkward enough, happened. The two companies reached an agreement to bid a joint offer in which they committed to lower fares by 31% on average from the current price level. It is unclear who initiated the move, yet it is reasonable that Gett was about to offer a much lower price for taxi rides affordable by its model and platform, and probably the management of the Hadar-Lod taxi company was alerted and in order to secure its stay in business felt compelled to match such an offer or simply join hands with Gett. The drivers belonging to Hadar-Lod thought otherwise and started at the end of May a spontaneous strike. The two bidders tried to reach a new agreement but eventually the veteran company had to retreat. One cannot be certain that drivers with Gett would have co-operated — the new price level may have been affordable for Gett but not necessarily worth the ride for the drivers. Apparently, the recommended official price was already or about to go down 7%, and with the further reduction committed in the bid offer, the taxi fare would drop on average by 38%. One would have to work many more hours to fill the gap. The cut was too deep — it may have worked well for the companies and their management but could never work for the drivers. (Note: An explanation from a taxi driver with Gett helped to describe the situation above.)

  • Having taxis from both companies in service would have provided some remedy with a transportation solution for every type of customer-passenger. But a certain mechanism and a person to supervise would be needed to keep order on the taxi platform. For instance, travellers subscribed with Gett may schedule their ride while in the luggage hall, and there would be Gett taxis waiting ready to pick them up. One would have to make sure there are enough taxi cars available for the other passengers.

That bid is now cancelled. The IAA declared that it would soon publish a new bid, and until its results are known, any licensed taxi driver can arrive and leave the airport with passengers as long as they register with the IAA. Are the official recommended prices still in place? Who will regulate the operation and watch that taxi drivers respect consumer rights of their passengers? Who will supervise in particular the allocation of passengers to authorised taxis at the arrival terminal (i.e., dispatching)? Answers will have to be found on ground. It is no surprise that the new situation has been received with apprehension by consumers-travellers and taxi drivers alike.

Consumers will have to learn from experience or relatives and friends what are acceptable price ranges for rides into and from the airport, and form anew their references for a fair price and the highest (reservation) price they are willing to pay. They may also set a low price level under which the reduced price may be suspected as “too good to be true”. A discounted price by a single driver to attract passengers, which deviates too much from a ‘normal’ price, should alarm the customer-passenger that something could be wrong with the service, or else there is a logical reason for the reduction. For example, the taxi driver may suggest ridesharing a few arriving passengers to a common destination area in Tel-Aviv — some passengers may be happy to accept, but the terms must be stated in advance. It is unclear how long the interim period will last, but the notions about pricing described above may remain valid even afterwards in a new service regime.

Making changes like adding competition, and especially by involving a disruptive innovation in the service domain, can improve matters. However, the process must be handled with care and watched over to avoid the system from derailing during the transformation. In this case, the IAA could and should have planned and managed the bid and implementation of its plausible outcomes more wisely. At this time, there must be at least one traditional taxi service operator allowed in addition to an innovative service mediated by a company like Gett at the airport, and rules have to be set and respected. Rushing into any drastic and innovative transformation of service will not do good for its chances of success, just invoke confusion and resentment — sufficient time and support must be given for the customers-passengers and taxi drivers to accommodate and adapt to the new service settings at the international airport.

Ron Ventura, Ph.D. (Marketing)

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The collapse of a company is not necessarily an outcome of a single calamitous event. More likely, a final collapse will follow a period of several months or years of gradual deterioration in the management and performance of the failing company. The causes are usually a mixture of external events or market factors and not least internal actions or non-actions committed by the company. This seems to be the case with Mega Retailing, the second largest chain of supermarkets in Israel, that practically collapsed this month (January ’16) but the process of its deterioration may be traced through at least five years backwards.

The current Mega retail chain is in fact a successor of a consumer co-operative chain, “Co-op Blue Square”, established in the 1930s. That co-operative existed until the late 1990s when it could no longer sustain itself. Consumers who had a stake in the enterprise were required to sell their shares and a majority stake in “Blue Square” (73%) was acquired by the Alon energy group.

The company, renamed in Israel as “Alon Blue Square”, expanded since 2003 and added more business units in different retail areas. For instance, Alon brought under the rooftop of Blue Square (holding a 78% stake) its compounds of car fueling stations with adjacent trade services. The chain of supermarkets received the new brand name Mega (after going through an earlier short phase under the name “Super Centre”), instituted as a subsidiary in full control of Blue Square, its home company. Yet another critical move saw the establishment of “Blue Square Real Estate”, a subsidiary of the home company, which divorced Mega from control over its physical locations, making the real estate company its landlord. At the end, Blue Square is about to lose the core business that carried its name to begin with.

  • Alon Blue Square also acquired a chain of convenience stores (“am:pm”) that is separate from Mega but competes with it in city centres and neighbourhoods.

Multiple reasons can be given for the poor condition of Mega as proposed in the media. Some blame the high operating costs of Mega on wages and benefits for employees being higher than standard in the food retail industry; it is probably a legacy inherited from the older days of Co-op Blue Square when it was affiliated with a strong labour union. Not to be confused, employees in stores still earn relatively low wages, but with the low margins in the industry, the differences from competitors are claimed to be crucial. On the other hand, the management could be held responsible for keeping deficiencies reminiscent of the culture of Co-op in those older days. The owners on their part did not seem to be interested enough in what was happening to their supermarket company. Mega was lacking in strategic (marketing) thinking and mindset that would allow it to adapt better to new realities of a competitive market and higher standards of servicing and merchandising.

One should not go far to find what is wrong with the Mega chain. The problems of Mega show most visibly and strikingly in its stores. A particular branch is used here as an exemplar to demonstrate some troubling aspects. It is a neighbourhood store in the northern part of Tel-Aviv. The supermarket is not large (estimated at a little less than 300sqm or about 2500sqf) with a main hall (75% of its area) and an extension (two “corridors”). The store was established in the early 1970s and for a decade or two it was considered spacious and modern. The last major renovation took place about fifteen years ago but unfortunately within a few years it has lost much of its newly gained attraction.

There are six columns of displays across the main hall which leave too little space for moving in the aisles between them. In addition, the displays reach high above the head. The whole arrangement of this hall makes a shopper feel lost in space and closed-in. Bad merchandising appears to make the supermarket look crowded and untidy. A whole new concept should have been applied to this store with fewer columns, lower displays (e.g., no more than 1.50m) that would allow shoppers to look beyond the aisle, and fewer product types and brands (SKUs) on offer — in this supermarket ‘less is more’ would be perfectly right. Shoppers obliged to get essential products like bakery and dairy in corridors may find it unpleasant.

Another troubling matter in the store concerns the shopping carts and baskets, or rather the lack of them. To pick-up one of the few shopping carts available one has to pass across the cashiers and away from the entrance. Even if one was lucky to get a shopping cart, he or she would find the cart difficult to navigate with in the aisles, especially as the store, like the whole chain, moved to larger carts definitely not useful in this specific store. What shoppers should have been provided are hand-held baskets (or wheeled baskets), and these should have been arranged in ‘towers’ near the entrance of the supermarket (not hidden under cashier desks). The baskets would serve a much better purpose in the entry area than a large unappealing promotional stand positioned there. As a result, the store also does not have a welcoming and convenient “decompression zone”.

  • Considering the competition in vicinity (e.g., a large supermarket of the leader chain “Supersol” in a nearby shopping centre; a minimarket store across the street), the approach in that  Mega’s store, whether out of flawed thinking or lack of care, could not be affordable.

Similar problems can be found in other Mega stores: (a) A delivery service interrupts and blocks the way out for customers who take home their shopping bags  — delivery boxes are piled in a passage on the exit from cashiers, personnel are handling deliveries in the same area where customers should complete their shopping and leave, and preparing deliveries for some shoppers halts others for long minutes; (b) The staff arranges merchandise on shelves during the day, often blocking aisles with box-loaded shopping carts or boxes left on the floor — shoppers have to make their way competing with personnel on access to displays; (c) Product displays do not look neat and tidy, some items get out-of-place, some are falling to one side or another — even if shoppers are responsible for not leaving items in place, a store worker should always pass by, check and fix displays. If shoppers find a store in good order, clean and tidy, they will (mostly) feel obliged to make an effort to keep it that way for everyone to enjoy.

It does not seem to be a question of good will. Mega stores are missing order and organisation. Moreover, the employees may not have a guiding hand and initiative they need from either general management or store managers to get the supermarkets look and feel the way they probably aim at. In a  presentation (in Hebrew) of a strategic plan from 2013 (Blue Square’s website) the management of Mega shows that on top of every other goal they want the customers to love their stores; Mega’s vision through its history is “At Mega (we’re) listening to you! Always, at every place and in every encounter, because we really care.” Yet the stores could not show for it. The employees may have wanted it to happen but the management was not behind them to show them how, and it is still unclear why store managers were not helping or how well coordinated they were with top management.

A seasoned consultant in marketing and retailing (Galit Moor, “Shopoholist”) told “The Marker” Israeli business newspaper about rivalries and non-coordination between the trade and operational departments of Mega — the trade people would reach agreements with suppliers but operations people would not respect them and not follow them through in the stores, causing confusion and loss of trust of suppliers. She also related to lack of understanding of consumers and not really listening to their concerns, a top management detached from the stores, and mistakes in running stores, particularly failures in dealing with details at the store level (MarkerWeek, 24 July 2015). The management was not focused, undecided whether to compete on price (e.g., to fight off discount chains) or on enhanced customer experience (blending price perception, service, convenience, variety and quality of products), and therefore it must have had difficulties setting clear priorities to staff at stores. It is not too surprising that staff and managers could neither treat properly details of service and merchandising in the stores.

In mid-2015 Mega was in debt of 1.3 billion shekels (~$340m), 700 million shekels of which owed to suppliers and the rest to banks. The delay in payments to suppliers has led to sour relations with them, where some have also froze or reduced further supplies to the retail chain. Mega started with an aggressive plan of cuts, primarily closing stores, but it could not save it at this stage. By the end of 2015, just before the court intervened (stay of proceedings), the debt accumulated to 1.5 billion shekels, half of which to suppliers who largely lost confidence in and patience with Mega.

In the previous decade Mega has expanded while defining three sub-chains: “Mega City” supermarkets for serving neighbourhoods, large central “Mega”-stores, and large discount stores (“Mega Bull”, i.e., “target”). The latter was re-named just three years ago “You” and added more stores.  Mega was actually responding to a move similar in kind by the leading competitor Supersol with their sub-chains “My Supersol” neighbourhood  supermarkets, “Supersol Express”, and large discount stores “Supersol Deal” (a confounded fourth sub-chain of ‘warehouse’ discount stores “Big” was later eliminated). Probably not by coincidence, the restructuring of chains by Mega and Supersol resemble a strategic move by Tesco in the 1990s. The expansion, and especially the establishment of very large stores, has led the Israeli chains, like the British one, into trouble. The suspect reasons are failure to adapt in time to changes in economic atmosphere and consumer behaviour since 2008 vis-à-vis an inadequate reply to the challenge from new discount chains. (It is now revealed that Tesco faulted in delaying payments to suppliers, as Mega did.)

  • Mega operated in total about 185 stores in mid-2015. Initially the plan was to close 32 stores, mainly their “You” discount stores. However, it eventually closed at least 55 stores by the end of the year, and Mega is now left with fewer than 130 stores. Its number of employees was intended to be reduced from 6,000 to 5,000 but actually dropped to 3,500 (most of them were store employees, but the staff in headquarters was also significantly cut).
  • In the first half of 2015 Mega reported sales of 2.6 billion shekels (~$685m), down from almost three billion shekels in same period of 2014. Of total sales, 80% were attributed to the stores Mega expected to keep and 20% to the 32 stores intended to be shut down. In profit, stores planned-to-continue earned 55m shekels whereas stores planned to close lost 577m shekels. As it turned out, the initial recovery plan was not sufficient.
  • Mega is second to Supersol in the food retailing industry yet not so close behind: Supersol’s market share in 2014 was estimated 18% versus Mega with 9% (a ratio of 2:1). The private discount chains held together 28% [stable 45% attributed to open-air markets, groceries and minimarket stores]. It should be noted that according to predictions (2013-2015) the private chains were expected to gain mostly at the expense of Mega with a small but not negligible slide down for Supersol (The Marker, 30 Dec. 2014) — Mega found itself in a classic disadvantageous ‘sandwich’ position.

From start Mega committed to selling at lower prices than other stores in towns and cities. At the same time, it aimed for each store to be an integral part of its community, so that residents-shoppers will feel at home in their supermarkets. However, Mega did not succeed in maintaining its ‘low price’ position according to price comparisons published over time. It is questionable whether restructuring its chain, following Supersol, was necessary and suitable for Mega. The position of Mega City on prices may have been only weakened and diluted relative to its discount sub-chain. Mega has already had a well-entrenched network of neighbourhood supermarkets with emphasis on lowering cost to consumers — it should have concentrated its efforts on this chain. Yet, Mega did not succeed to keep lower prices as well as invest in the shopping experience and product variety in its stores, potentially conflicting objectives; it did not offer thereof a consistent value proposition.

It is difficult to understand how the owners of Alon Blue Square did not notice what was happening at Mega. They are accused of taking high dividends over time (the owners claim they have been misinformed about real profits, ringing bells from Tesco). The owners may have also acted irresponsibly by means of an over-charging rental policy of its real-estate subsidiary towards Mega’s stores.

The interests of the owners at this stage are vague. Blue Square chose to rent properties to chains that took over stores of Mega-You — was it to salvage Mega or to protect other interests of Blue Square? Proposals published to buy Mega retail chain actually focus on Blue Square Real Estate. Truly, one has to buy the properties in order to be able to continue operating stores in them, but that is only due to a status created by the owners that may now play against Mega. Hence, it could be a major difference if the potential buyer is a retailer or a real-estate developer. It is in the public’s and the food retailing industry’s interest that the buyer is required to take over also the supermarket business of Mega and not dispose of it. It is furthermore important that the supermarket industry has at least one other strong retail chain as a challenger to Supersol, not leaving Supersol over-powered against a competition too dispersed among several small and medium chains.

There is not really a good reason to miss “Blue Square” as a co-operative. A new competitive business ownership and directive has had an opportunity to re-create the supermarket chain and its brand. The chain was re-branded as Mega and yet it disappointed because core components of strategy, culture and implementation were flawed. It is now time to re-invent the concept of the chain and its brand. Nonetheless, the title “Blue Square” at Alon without the supermarket retail chain will be quite void and meaningless.

Ron Ventura, Ph.D. (Marketing)

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From a consumer viewpoint, choice situations should be presented in a clear and comprehensible manner that facilitates consumers’ correct understanding of what is at stake and helps them to choose an alternative that fits most closely their needs or preferences. But policy makers may go farther and design choices to direct the decision-making consumers to a desirable or recommended alternative in their judgement.

It is very likely for Humans (unlike economic persons, or Econs) to be influenced in their decisions by the way a choice problem is presented; even if unintentional — it is almost unavoidable. Sometimes, however, an intervention to influence a decision-maker is done intentionally. Choice architecture relates to how choice problems are presented: the way the problem is organised and structured, and how alternatives are described, including tools or techniques that may be used to guide a decision-maker to a particular choice alternative. Richard Thaler and Cass Sunstein have called such tools ‘nudges’, and the designer of the choice problem is referred to as a ‘choice architect’. In their book, “Nudge: Improving Decisions About Health, Wealth and Happiness” (2009), the researchers were very specific, nonetheless, about the kinds of nudging they support and advocate (1). A nudge may be likened to a light push of a consumer out of his or her ‘comfort zone’ towards a particular choice alternative (e.g., action, product), but it should be harmless and left optional to consumers whether to accept or reject.

Thaler and Sunstein argue that in some cases more action is needed to ‘nudge’ consumers in a right direction. That is because consumers, as Humans, often do not consider carefully enough the choice situation and alternatives, they tend to err, and may not do what would actually be in their own best interest. It may be added that consumers’ preferences may not be well-established, and when these are unstable it could make it furthermore difficult for consumers to find an alternative that fits their preferences more closely. Hence, the authors recommend acting in a careful corrective manner that guides consumers towards an alternative that a policy maker assesses will serve them better (e.g., health-care, savings). Yet they insist that any intervention of nudging should not be imposed on the consumer. They call their approach ‘libertarian paternalism’ — a policy maker may tell consumers what alternative would be right for them but the consumer is eventually left with the freedom of choice how to act. They state that:

To count as a mere nudge, the intervention must be easy and cheap to avoid. Nudges are not mandates. Putting the fruit at eye level counts as a nudge. Banning junk food does not.

Thaler and Sunstein suggest six key principles, or types, of nudges: (a) Defaults; (b) Expect error (i.e., nudges designed to accommodate human error); (c) Give feedback (nudges reliant on social influence may be included here); (d) Understanding ‘mappings’ (i.e., a match between a choice made and its welfare outcome, such as consumption experience); (e) Structure complex choices; (f) Incentives. The authors discuss and propose how to use those tools in dealing with choice issues such as complexity and a status quo bias (inertia) (e.g., applied to student loans, retirement pensions and savings, medication plans).

Let’s look at some examples of how choice architecture may influence consumer choice:

A default may be set-up to determine what happens if a consumer makes no active choice (e.g., ‘too difficult to choose’, ‘too many options’) or to induce the consumer to take a certain action. Defaults can change the significance of opt-in and opt-out choice methods. A basic opt-in could ask a consumer to tick a box if she agrees to participate in a given programme. Now consider a slight change by pre-ticking the box as default — if the consumer does not like to join, she can uncheck the box (opt-out). A more explicit default and opt-out combination could state up-start (e.g., in a heading) that the consumer is automatically enrolled in the programme and if she declines she should send an e-mail to the organiser. If inclusion in a programme is the default, and consumers have to opt-out of the programme, many more will end-up enrolled than if they had to actively approve their participation. Yet the effect may vary depending on the ease of opting-out (just unchecking the box vs. sending a separate e-mail). Defaults of this type may be used for benign purposes such as subscription to a e-newsletter versus sensitive purposes like organ donation (2).

  • A default option is particularly attractive when the ‘alternative’ action is actually choosing from a long list of other alternatives (e.g., mutual and equity funds for investment).

Making a sequence of choice decisions is a recurring purchase activity. As a simple example, suppose you have to construct a list of items that you want to purchase (e.g., songs to compile, books to order) by choosing one item from each of a series of choice sets.  Presenting choice-sets in an increasing order of choice-set size is likely to encourage the chooser to enter a maximising mind-set — starting with a small set, it is easier to examine more closely all options in the set before choosing, and while the set size increases the chooser will continue trying to examine options more exhaustively. When starting with a large choice-set and decreasing the size thereon, the opposite happens where the chooser enters a simplifying or satisficing mind-set. Thus, over choice-sets, the chooser in an increasing order condition is likely to perform a deeper search and examine overall more options. As described by Levav, Reinholtz and Lin, consumers are “sticky adapters” (3). When constructing an investment portfolio, for instance, a financial policy maker may nudge investors to examine more of the funds, bonds and equities available by dividing them into classes to be presented as choice-sets in an increasing order of size (up to a reasonable limit).

Multiple aspects of choice design or architecture arise in the context of mass customization. Taking the case of price, a question arises whether to specify the cost of each level of a customized attribute (actually the price premium for upgraded levels vs. a baseline level) or the total price of the final product designed. A proponent opinion argues that providing detailed price information for levels of quality attributes allows consumers to consider the monetary implications of choosing an upgraded level on each attribute. It is not as difficult as trying to extract the marginal cost of a level chosen on each quality attribute from the total price. Including prices for levels of quality attributes leads consumers to choose more frequently intermediate attribute levels (compared with a by-alternative choice-set)(4). A counter opinion posits that carefully weighing price information on each attribute is not so easy (consumers report higher subjective difficulty), actually causing consumers to be too cautious and configure products that are less expensive but also of lower quality. Hence, providing a total price for the outcome product could be sufficient and more useful for the customers (5). It is hard to give any conclusive design suggestion in this case.

In a last example, the form in which calorie information is provided on restaurant menus matters no less than posting it. As a recent research by Parker and Lehmann shows, it is practically possible to be over-doing it (6). Consistent with other studies, the researchers find that when posting calorie figures next to food dishes, consumers choose from the calorie-posted menu items with lower calorie content on average than from a similar traditional menu but with no calorie figures. Separating low-calorie items from their original categories of food type (e.g., salads, burgers) into a new group, as some restaurants do, may eliminate, however, the advantage of calorie-posting. While the logic of a separate group is that it would make the group more conspicuous and easier for diners to attend to it, it could make it easier for them instead to exclude those items from consideration. Nevertheless, some qualification is needed as the title given to the group also matters.

Parker and Lehmann show that organising the low-calorie items in a separate group explicitly titled as such (e.g., “Low Calories”, “Under 600 Calories”) attenuates the posting effect, thus eliminating the advantage of inducing consumers to order lower-calorie items. The title is important because it is easier this way for consumers to screen out this category from consideration (e.g., as unappealing on face of it). It is demonstrated that giving a positive name unrelated to calories (e.g., “Eddie’s Favourites”, “Fresh and Fit”) would generate less rejection and make it no more likely to be screened out as a group than other categories. In a menu that is just calorie-posted, consumers are more likely to trade-off the calories with other information on a food item such as its composition and price. But if the consumers are helped to screen the low-calorie group as a measure of simplifying their decision process in an early stage, it means they would also ignore their calorie details.

  • An additional explanation can be suggested for disregarding the low-calorie items when grouped together: If those items are mixed in categories of other items similar to them in type of food, each item would stand-out as ‘low calorie’ and be perceived as different and more important. If the low-calorie items are aggregated on the other hand in a set-aside group, they are more likely to be perceived as of diminished importance or appeal collectively and be ignored together. (cf. [7]). Therefore, creating a separate group of varied items pulled out from all the other groups sends a wrong message to consumers and may nudge them in the wrong direction.

Both public and private policy makers can use nudging. But there are some limitations deserving attention especially with regard to private (business) policy makers. Companies sometimes act out of belief that in order to recruit customers they should present complex alternative plans (e.g., mobile telecoms, insurance, bank loans), which includes obscuring vital details and making comparisons between alternatives very difficult. They see nudging tools that are meant to reduce complexity of consumer choice as playing against their interest (e.g., if choice is complex it will be easier for the company to capture [trap-in] the customer). That counters the intention of Thaler and Sunstein, and they stand against this kind of practice.

In the case of helping customers to see more clearly the relation, and match, between their patterns of service usage and the cost they are required to pay, Thaler and Sunstein propose a nudge scheme called RECAP — Record, Evaluate, and Compare Alternative Prices. The scheme entails publishing in readily accessible channels (e.g., websites) full details of their service and price plans as well as provide existing customers periodic reports that show how their level of usage on each component of service contributes to total cost. These measures that increase transparency would help customers understand what they pay for, monitor and control their costs, and reconsider from time to time their current service plan vis-à-vis alternative plans of the same provider and those of competitors. The problem is that service providers are usually reluctant to hand over such detailed information from their own good will. Public regulators may have to require companies to create a RECAP scheme, or perhaps nudge them to do so.

In the lighter scenario, companies prefer to avoid nudging techniques that work in the benefit of consumers because of concern it would hurt their own interests. In the worse scenario, companies misinterpret nudging and use tools that actively manipulate consumers to choose not in their benefit (e.g., highlight a more expensive product the consumer does not really need). Thaler and Sunstein are critical of either public or private (business) policy makers who conceive and apply nudges in their own self-interest. They tend to dedicate more effort, however, to counter objections to government intervention in consumers’ affairs and popular suspicions of malpractice by branches of the government (i.e., these issues seem to be of major concern in the United States that may not be fully understood in other countries). Of course it is important not turn a blind eye to harmful usage of nudges by public as well as private choice architects.

There are many opportunities in cleverly using nudging tools to guide and assist consumers. Yet there can be a thin line between interventions of imposed choice and free choice or between obtrusive and libertarian paternalism. Designing and implementing nudging tools can therefore be a delicate craft, advisably a matter primarily for expert choice architects.

Ron Ventura, Ph.D. (Marketing)

Notes:

(1) “Nudge: Improving Decisions About Health, Wealth and Happiness”; Richard H. Thaler and Cass R. Sunstein, 2009; Penguin Books (updated edition).

(2) Ibid 1, and: “Beyond Nudges: Tools of Choice Architecture”; Eric J. Johnson and others, 2012; Marketing Letters, 23, pp. 487-504.

(3) “The Effect of Ordering Decisions by Choice-Set Size on Consumer Search”; Jonathan Levav, Nicholas Reinholtz, & Claire Lin, 2012; Journal of Consumer Research, 39 (October), pp. 585-599.

(4) “Contingent Response to Self-Customized Procedures: Implications for Decision Satisfaction and Choice”; Ana Valenzuela, Ravi Dahr, & Florian Zettelmeyer, 2009; Journal of Marketing Research, 46 (December), pp. 754-763.

(5) “Marketing Mass-Customized Products: Striking a Balance Between Utility and Complexity”; Benedict G.C. Dellaert and Stefan Stremersch, 2005; Journal of Marketing Research, 42 (May), pp. 219-227.

(6) “How and When Grouping Low-Calorie Options Reduces the Benefits of Providing Dish-Specific Calorie Information”; Jeffrey R. Parker and Donald R. Lehmann, 2014; Journal of Consumer Research, 41 (June), pp. 213-235.

(7) Johnson et al. (see #2).

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An inspection of the mobile app-based services run by companies like Uber, Gett (formerly GetTaxi), Lyft or Hailo raises important issues about the distinction between taxi and non-taxi ridesharing transportation for individuals. Developments of the past two years seem to have broken the boundaries of driving-for-pay. A utility that started as an option for hailing licensed taxis by a mobile app is turning into an unruly “business” of private drivers. Uber in particular is the source of disruption in the ‘private transport’ sector that is causing much public controversy and protest by professional drivers.

The convenience in hailing a taxi using a mobile app when needed from anywhere a passenger may be in town, instead of hand-hailing in the street until a free taxi shows up is clear and undisputable. Through technology a taxi driver in vicinity is notified and can arrive without further human briefing to the passenger to pick him or her up for the ride — it can save precious time and nervous waiting. It may also help drivers reduce wasted time and fuel whilst wandering between “jobs” until a new customer is found. The applications in market were aimed originally to connect between consumers-passengers and drivers of taxis, black cabs and limousines.

A crucial aspect to notice about those mobile e-hailing applications is that they allow drivers to take customers independently of a present employer or a fleet they may belong to. Briefly, an app of this type incorporates geo-location, reservation management and credit payment functionalities so that a driver is related only with a passenger on one side and the technology company operating the app on the other side. No cash is actually passing between the three parties involved. This arrangement soon proved to have a potential to involve a larger variety of employed and non-employed, trade-licensed and non-licensed drivers.

For taxi companies or syndicates the problem is twofold. Professional drivers often depend on local fleet operators for their license, car and livelihood because of the companies’ strong influence over issuance of new taxi licenses. A license and an authorised (properly marked) taxi vehicle are harder to get without affiliation to a fleet. The new app utility may open a window for changing the balance of power between companies and upset professional drivers. Furthermore, affiliated taxi drivers may occasionally take passengers reached via the mobile app without going through the fleet, and perhaps even without notifying the dispatcher. The fleet operator risks here a loss of control, authority and income (grabbed instead by the tech company — Uber for example collects 20% of the fare).

Some co-operation between the mobile technology companies and local taxi operators and associations may still exist (e.g., authorised taxi vehicles in Israel can be seen carrying a sticker of GetTaxi) but that is less likely now, especially after Uber expanded the scope of drivers it would work with. That is, Uber opened the gate for private drivers, anyone who has a driving license and a car, to provide “private ridesharing” transportation. Subsequently, frictions with taxi fleet operators have expanded into hostile struggles with unions and professional associations of taxi drivers as well as city and state authorities.

Uber, Gett, Lyft, Hailo, and others similar to them, are designated as transportation network companies ; the networks are constructed, accessed and managed by means of mobile applications. The challenge mounted primarily by Uber is the expansion of the network to allow non-formal drivers to transport other passengers in their private cars for payment. The schemes of Uber for this “ridesharing” portion of their network are known in different countries as UberX, UberPop or UberPool. However, the descriptive title of ‘ridesharing’ for this activity is contentious.

Many probably know car-pooling from their time in college or university: students group together to transport to or from campus in the car of one of the group members and share the cost of fuel between them. Frequently the participants are friends or acquaintances (e.g., classmates, sharing the rental of a house) but at the very least they are connected by affiliation to the same institution. Due to rise in cost of fuel, traffic congestion and air pollution, car-pooling has become more prevalent also among working peers employed in the same organization (as among colleagues whose work is in City A and live in City B). We may see another form of saving on transportation by a small group of people who rideshare a taxi (e.g., for an evening out at a restaurant or on the way back home, dropping each at a separate address). These are usually voluntary and informal arrangements where people related to some degree either ride in the car of one of the group members or hire together a taxi with a professional driver. Uber tries to emulate both and yet enables none of these arrangements.

The term ‘ridesharing’ seems rather ambiguous the way Uber claims to implement it. Uber, Lyft, and others like them, present themselves as platforms for “peer-to-peer transportation”, not as passenger services. But who are the peers when ridesharing with Uber’s schemes mentioned above? There is no guarantee that the driver and passenger are “peers” or acquaintances of any kind nor is there any requirement that a group of people “share” the ride with Uber’s driver. The driver is not formally required to have the same destination as the passenger nor does the passenger’s destination need to be on the driver’s route anywhere else. In real terms, passengers are actually hiring a driver known to them only via the mobile app with none of the assurances that normally accompany the hiring of a licensed taxi driver. Administrative and legal authorities in various countries noticed that this operation occurs in grey area and started to suspend or ban such questionable schemes by Uber in different cities or countries.

  • Given the capital Uber has raised thus far it is valued as of May 2015 at $40bn. Uber operates in more than 250 cities in nearly 60 countries, though in some locations part of its activity is suspended due to legal disputes.

In the Netherlands Uber tried to argue that its UberPop scheme is a car-pool service as opposed to a taxi service. However, the Trade and Industry Appeal Tribunal in the country rejected this defence claim because it failed the legal requirement of taxi drivers to have a special license. The ruling on 8th December 2014 determined that “drivers who transport people for payment without a license are breaking the law“. UberPop was also banned a day after by a court judge in Spain because drivers lacked official authorisation to offer driving services. It should be noted that the cost of the ride is not estimated and agreed by the co-passengers with the driver to share but it is a fare determined by a third-party tech company. Moreover, people in a private, non-formal arrangement also usually do not deal with each other by credit cards. The claim of Uber sounds naive and unrealistic or simply a case of pretence.

By the end of 2014 Uber was dealing with additional legal restrictions and bans from the US (e.g., Portland, Orgeon; Nevada; and even in Uber’s hometown San-Francisco) and Canada (Toronto), through Europe (e.g., Paris, France; Berlin and Hamburg in Germany) to India (New Delhi) and Thailand in Asia. A map chart by The Telegraph depicts all the places where Uber is operating and where its activity has been banned or curtailed. The UberPop service is currently under scrutiny in Paris for failing a law passed late last year that regulates the services of chauffeured cars vis-à-vis taxis; Uber’s office in Paris was raided by police in March, confiscating mobile phones and documents (*).

In face of the rising criticism in Europe Uber adamantly argues that it is a technology company, not a transport company; thereby it does not own the vehicles nor hire any of the drivers who engage in its schemes, including UberPop. In the view of Uber, its mobile technological platform only helps in mediating between the drivers and passengers. Yet the European Commission is not hurrying to accept this argument, underlying Uber’s own complaints that national laws in Europe unjustly constrain its competition with taxi services. Uber may not directly transport people but its digital platform has an impact on transportation, a spokesperson for the EC commented in response. Indeed, can Uber defend itself as merely a technology company without taking any responsibility for the effects of its mobile app’s activity on the physical transportation services?  This matter is now under examination by the EC as part of an overall study of the taxi and chauffeur service industry.


The brand (corporate-root) name “Uber” (originally Über in German) is problematic on two counts. The company transmits through its name that it owns a superior transportation network. First, it is an arrogant claim that may be perceived as provocative particularly by licensed taxi drivers for being contested by Uber’s network of private drivers who operate above them and the rules of transportation service that confine them. Second, the name is quite insensitive because of the associations it may bring to mind that carry a strong negative connotation from the 1930s and 1940s. In addition, the attempt of Uber to justify themselves as only a technology company not responsible for the operation of transportation itself alerts one to think that the company is not inasmuch “Über Alles” (above all) as it is “Über Chuchem” (over-smart in Yiddish). The choice of name was not clever. It is already wide-spread around the world, but the name is tainted and may levy a price in future.

Uber and competing technology companies succeeded in introducing alternative private transport solutions for a reason: consumers who have become too frequently unsatisfied and even frustrated with the service delivered by licensed taxi drivers were open to the new type of “ridesharing” solutions. It may be triggered by complaints on low in-time availability, high cost and lack of reliability (e.g., not taking a shorter route, attempt to evade turning-on the taxi-meter). Sometimes it could be a feeling that the driver did not feel obliged enough to be kind to the passenger. Surely, many taxi drivers are honest, reliable and friendly, but the image of their service is tarnished by those who are less so. Obviously. the use of an e-hailing app is only part of the story here.

The main goal is protecting the quality and safety of taxi rides and other private chauffeur transport services. The business model offered by Uber is threatening to cause more damage than improve the situation — one cannot let these services be operated without oversight by official professional transportation agencies. There are some major concerns to address: (a) assuring the driving qualifications of the private drivers (though seeing how some authorised taxi drivers behave on the road makes one wonder also about their qualifications and the traffic rules they abide to…); (b) approving the physical fitness of the private driver; or (c) certifying the technical fitness of the private car used. Uber has already been charged with not making proper checks on the drivers who join them. Uber, though not alone, cannot be left to set its own rules for drivers.

The issue of cost and how ride-fares are measured is receiving special attention. Uber in particular has been charged with surge pricing (i.e., enacting a higher rate at peak hours when taxis are more difficult to get), a conduct other companies distance themselves from. More generally, the GPS-based assessment of fares is a subject of debate — is it accurate enough and can it be allowed in place of approved taxi-meters? According to Transport for London (TfL), fare calculations on smartphones are sufficiently divergent from taxi-meters’ for smartphones not to constitute a conventional metering equipment. Cab drivers in London went on strike to protest to TfL the special status of Uber, yet in a strange twist this stand may be used to protect Uber as a non-taxi service — TfL promised to investigate and resolve the conundrum. The fares at Uber are normally 15-20% lower than with licensed taxis. Passengers have to trade-off the expected saving against uncertain outcomes (e.g., reliability, safety) when riding with unauthorised private drivers. The decision may be different however if drivers applying Uber’s app were approved by official agencies.

A complex problem developed in multiple countries and is going to be difficult to sort out. In the short-term, taxi associations may collectively set-up or continue contracts with local mobile technology companies for operating sponsored e-hailing apps and guarantee 5-10% discounts to their users-passengers. In the long-term, it will be necessary to amend wounded relations between taxi drivers and consumers, and to consider if and how to accommodate different classes of authorised-licensed drivers, all kept under oversight of official professional agencies. Meanwhile, the mobile tech companies who probably sense the difficulties in the transport sector are already looking for new frontiers, to expand the use of their apps in other services (e.g., deliveries).

Ron Ventura, Ph.D. (Marketing)

(*) Uber Gets Reprieve in Paris in Fight on Low-Cost Service, International New-York Times (with Reuters), 1 April 2015.

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A consumer who eats a chocolate product would want to know that it contains the ingredients it is supposed to — mainly cocoa. That sounds so reasonable and understandable. If you are a true chocolate lover, it is not enough that the food product tastes like chocolate; you want it to be really a chocolate. This is expected not only from chocolate bars and confiserie (pralinés, truffles) where it is obvious. It should also hold for snacks like chocolate-coveted waffles, cookies and biscuits with chocolate, and milk delicatessen with chocolate. But “chocolate products” are not always what consumers would expect or believe them to be. One example as such is a milk deli called “Milky” from Strauss dairy company (Israel).

Some companies may think that resembling chocolate in flavour and appearance is enough. It does not have to be a complete fake (i.e., no cocoa, just flavour and colour substitutes). The more clever companies include in the product some cocoa substances, only to give it a feeling of chocolate. However, formal food standards are quite strict and require that a product contains a minimum (proportional) amount of cocoa substances to be designated as “chocolate” or a “chocolate product”. An honest company that sells a product which does not stand by the standard can state that its product is “chocolate flavoured”, though it leaves the consumer to figure out what that means. Yet sometimes companies tempt to hide the reality about the chocolate content of their presuming product.

Milky is a special dairy deli product. It comes in two layers: a chocolate cream at the base (about 2/3 of the cup) and whipped cream on top. This combination has bought Milky many fans — some prefer to keep the layers in place and dig in with a spoon to pick some chocolate cream from below and then take whipped cream from above, whilst others simply mix the creams well together and indulge on the composition. Milky was created and first launched in 1979 when Strauss, now the second-sized dairy in Israel, was a marginal local dairy. But the deli has made its leap to fame and popularity only in the early 1990s following its wonderful, humourous commercial “The Chase for Milky” (two housewives chase each other in a supermarket to collect the last Milky on the shelf). It was one of the best executions of a TV commercial in the early days of advertising on TV in Israel (Channel 2) , and it quickly caught the attention and favour of consumers.  Along the years Strauss has added variations of Milky like a supplement 0f tiny candy beans, “extra chocolate”, and “mini” serving.

But is the chocolate cream really made of cocoa, its essential component? Two class action suits against Strauss (for 274m shekels=~€62m), submitted in 2013, have put the composition of the chocolate cream into question. Two claims were made, one against the label title declaring the product as “Milky Chocolate”, and another regarding an image of a chocolate cube on the label. The two lawsuits were settled together this month (February 2015) in court in a compromise agreement between the plaintiffs and Strauss.

Only a symbolic monetary compensation was awarded because no direct damage to the plaintiffs or the consumers they represent could be proven  — though Strauss has agreed to donate dairy products in worth of 300,000 shekels (~€70,000) to a peripheral hospital or a similar association as decided by court. But although the litigation ended in a compromise the bottom line is that Strauss was charged with wrongdoing by misleading consumers and was ordered to change the way it describes its Milky products (“Milky Chocolate”, and its “extra chocolate”, “mini” and “light” versions). The judge ruled that the designation “chocolate”, as if the product contains chocolate, misrepresents its content; the label should instead state that Milky is “in chocolate flavour”. It was also confirmed that the picture image of a chocolate cube may give consumers a false impression about the product’s nature but without concluding that the image should be removed.

The heart of chocolate is its cocoa content: The amount of cocoa mass and cocoa butter (making up cocoa solids) in the final product. The European Union regulation from 2003 requires that for being designated “chocolate” or “chocolate (contained) product” cocoa solids must compose at minimum 25% of the product’s weight. This minimum particularly describes “milk chocolate” as the baseline. The practical norms vary for different types of chocolate. In Belgium, for example, the norm is that milk chocolate contains 30-35% cocoa solids, and dark or bitter chocolate includes 70% cocoa solids (extra bitter chocolate will have even 80-90% cocoa solids). White chocolate has only ~20% cocoa butter and no mass and therefore some connoisseurs question its status as “chocolate”.

  • The rule for (brown) chocolate in the EU is that cocoa mass should weigh at least 2.5% of the product, the rest of the cocoa solids made of cocoa butter. However, a larger amount of cocoa mass will improve the taste of chocolate (e.g., richness). The amount, quality and processing of cocoa beans making the cocoa mass are determinants of the overall quality of the chocolate.

The chocolate portion of a product comprises primarily cocoa solids, milk solids (including milk fat) and sugar. Producers of inferior or imitation chocolate replace cocoa butter (fat) with vegetable fats, yet the EU has entered a stipulation that vegetable fat can account for no more than 5% of the chocolate portion of the product (not of its total weight!). Other ingredients of the product (e.g., nuts, honey filling) contribute to the total product weight in addition to the chocolate portion or mix.

  • The UK has been specially allowed to market milk chocolate with just 20% cocoa solids and 20% milk solids whereas in continental Europe the norm is a mix ratio of 25% cocoa solids to 14% milk solids of total product weight. However, Europeans designate the former mix as “family milk chocolate” to be distinguished from their “milk chocolate”.

The current standard in Israel from 1996 refers to a minimum requirement of 30% cocoa solids in chocolate, but the Standard Institution of Israel notes it is “under revision” (according to a draft proposal from August 2014 the SII may adopt the EU rules). It is not revealed if the Milky product contains an insufficient amount of cocoa solids (even just cocoa butter) or none at all. Yet, whether the court ruling is based on the current standard or considering the prospect standard in line with the EU, the level of cocoa solids in Milky has had to be low enough to fail formal chocolate regulations either way. Since the product is largely made of milk produces, it may give the manufacturer a relatively large space for maneuvering between cocoa solids and milk solids. Ironically, the “extra” version of Milky that contains a greater amount of chocolate cream, and perhaps should have been “darker” chocolate, is not recognized as “chocolate” either.

It is very much possible that Milky did contain a larger proportion of cocoa substances in its chocolate cream in previous years. Manufacturers tend to get into a quality-price cycle in which they try with time to lower their costs by reducing the amount of higher quality ingredients in their products that are more expensive, thus lowering the product’s quality; they may nevertheless continue to raise the price to consumers to improve their profitability. There could be mitigating circumstances in this case, but the question is how companies like Strauss handle them. The rising prices of raw cocoa in the global market, especially so in the past few years, could have pushed manufacturers to gradually use less cocoa in the chocolate portions of their products. The alternative would be to raise the consumer price, but that has a limit in consumer acceptance — particularly in view of the growing social protest since 2010. It is worthy to note that the price of Milky in Israel compared with similar products in Europe played a role in this protest last fall.

Therefore, if Strauss has reduced the amount of cocoa in Milky to control its costs, it was wrong to conceal it from consumers. But pricing Milky as purportedly a chocolate product in disregard that it contains less or none of its more expensive ingredient, cocoa, is seemingly a grave mistake. Consumers are more dispositioned to perceive a company as unfair when it increases rather than only protects its profits. Strauss claimed that it had changed the labeling more than a year ago (as currently appears on their Milky labels) but it did not dissuade the judge from including the requirement in the compromise agreement.

Truly, Strauss and Milky are not alone in this game. Competing milk delis of chocolate cream are apparently also imitations given that they are labeled as “milk deli in chocolate flavour”. Additionally, a similar charge was made against a popular “chocolate” spread (“Hashachar Haole” — Hebrew for The Rising Dawn) that did not make clear on its packages that it actually had no chocolate in it as defined by standard regulations. It is now described as a “select cream for spreading”, specifying at most the cream is “in chocolate flavour”.

  • Cocoa can also have positive health implications. Research in past years has suggested that cocoa beans carry a benefit for cardiovascular performance where content in their nibs supports the growth of blood vessels, and increases blood circulation, helping to lower blood pressure. Moreover, a recent study (at University of L’Aquila in Italy with Mars Inc., cited in Scientific American) suggests that this is good not only for our heart but also for our brain: a better flow of oxygen to the brain improves cognitive functions. This benefit is attributed to compounds in raw cocoa beans known as flavanols. There is, however, a practical caution for consumers: The level of flavanol in chocolate products could be much lower than in raw cocoa due to food processing methods in use (even for dark chocolate), too little to have the expected effect. That may come as quite a disappointment for chocolate consumers. It is apparent that consumers should not hope for health benefits of this kind in products like Milky or Hashachar Haole.

This affair is a cause for embarrassment to Strauss. First, Milky has been a flagship brand and a source of pride for the company. The affair is hurting the brand of Milky by potentially diminishing the perceived quality of its product. Second, Strauss is now united with Elite, a major chocolate producer in Israel that was once an independent company and these days is a prime brand of Strauss, acting as an endorsing or umbrella brand for multiple product ranges (e.g., chocolate, coffee, candies). Therefore, Strauss management should have known better. It suggests that the two merged companies are still not properly integrated and there is not enough learning and collaboration between their managerial and professional staff. The damage to Strauss is accentuated by the fact that it has been publicly forced through a legal litigation to label its Milky products “in chocolate flavour”.

The takeaway to food manufacturers should be clear: Do not try to deceive consumers and let them believe their products have properties or ingredients they do not actually hold. Sadly, it is neither unusual nor new for companies to hide from consumers the true compositions of their products or any changes made in them over time. Milky could garner more consumer respect and support by describing it as “chocolate flavoured” but at the same time informing consumers of an actual, low yet non-zero proportion of cocoa solids in the product. Just do not try to hide it under the carpet because someone will lift the carpet for the company eventually.

Ron Ventura, Ph.D. (Marketing)

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The major British grocery retailer Tesco is in a crossroad. Strategies that have brought the retail chain success, good reputation, and a leading position do not work as well as in past years. Tesco has been frequently commended for its Clubcard loyalty programme, established in 1996, that implemented an exemplary customer data-driven approach in the realm of relationship marketing; it has put the chain way in advance of all its UK competitors. During the previous decade Tesco also initiated its advanced concept of segmented network of different types of stores for different types of shopping that is continuously growing. Notably, the UK-based company has expanded into more countries and to more types of business, becoming a giant global retail group. But now Tesco finds itself in difficulty. The mission is to find where matters have gone wrong and how to put Tesco back in order.

The recent accounting blunder in which the group over-stated its profits, troubling enough, is truly only a symptom of deeper problems in the management of Tesco, going at least three years back. The profit error in excess of £263m corresponds mainly (£118m) to the first half of the current financial year (2014/15), but it extends to the previous two years, too (following an investigation by Deloitte concluded in October).

  • This error was caused, in the words of departing chairman Broadbent, by “accelerated recognition of commercial income and delayed accrual of costs in the UK food business“(1), referring to incorrect timing of reporting payments made to suppliers (done late) and concessions Tesco received from them due, for example, to promotions given in its stores (done too early). The accounting misstatement may have occurred innocently because of lack of professionalism and a guiding hand in running the company’s finances (Tesco, reportedly, did not have a CFO for a while). In the worse case, it was done to conceal the decline in its business and poor financial performance. Either way, it is evident of underlying faults in the way the company was run in recent years.

The years 1997-2010 have been a significant period of intensive activity and growth at Tesco, led by two successive CEOs, Leahy followed by Clarke. It was a period full of ambition to extend internationally and engage in additional product and service categories, beyond Tesco’s core competence in food and general household retailing. But then Tesco was caught unprepared to cope with the financial crisis of 2007-2008 and the recession that followed, especially since 2010. Tesco under Clarke was late to respond, and continued its expansion “business as usual” despite the evident decline in consumer spending. Time has now come to re-align and to take a more focused approach on those business areas and retailing activities in which the company is more capable to satisfy both its customers and shareholders. The new CEO Dave Lewis, as of August 2014, re-stated that Tesco sees itself as a customer-centric company that intends to continue providing best value to consumers through its pricing, services, and stores. It remains to be seen how the new management keeps true to this commitment.

Tesco’s Stores in the UK

The British retailer distinguishes between different patterns of consumer shopping under different circumstances or for varied purposes; about ten years ago it split its mother-chain into four main types of chain stores. At the core are traditional supermarkets, known as Superstores at Tesco (482 stores as of Oct. ’14). It has added Extra mega-size stores with a much larger range of products and at lower prices for shoppers who want to stock-up their households for longer periods on fewer concentrated shopping trips (248 stores). On the other hand, Tesco developed a Metro type of store (reduced supermarket) to be located in centres of large cities and accommodate the unique needs and time constraints of working shoppers (194 stores). In addition they established a sub-chain of Express stores in a format like convenience stores for really rush trips and smaller baskets for products in immediate shortage — this is in fact the largest sub-chain currently (1,709 stores).

Mainly the three new groups of stores have grown since 2005; all four types account for more than 2,600 stores in the UK (there are some additional 800 stores of other retail-formats). The Express chain stores faced particular resentment from independent merchants because these stores have been established at their expense, by buying them out or by drawing local customers from them in their neighbourhoods (some have resolved the issue by becoming franchisees). However, it apparently was a more correct move to make than creating the Extra stores. To the surmise of Tesco, consumers are less attracted to the mega-store format because they are now less interested in making large purchases on any single shopping trip. Instead, consumers are more inclined to fill-in their stocks for the coming days (e.g., as budget or available cash allows). The advantage of buying at lower prices at Extra stores, as in the chain as a whole, also diminished in face of a challenge from more efficient discount chains like Aldi and Lidl from Germany.

Tesco has several concerns to confront and resolve. Its position is furthermore unfortunate because it is sandwiched between discounters as mentioned above and high-quality, high-status chains such as Sainsbury’s, Morrisons, and Marks & Spencer. Tesco invested in its own-brands and in prepared as well as fresh meals, and yet it is still not considered in the same class with the high-quality chains. Those chains have a much clearer proposition with regard to product and service quality than Tesco. In addition, analysts argue that Tesco’s stores have become complicated to shop — they are too large, hard to navigate, difficult to find products needed from a selection too broad, and particularly too difficult to find value. (2)

From 1994 until the end of 2005 the market share (MS) of Tesco climbed consistently from 17% to 30%, surpassing in 1995 Sainsbury’s, the leader until that time, and leaving all food and grocery chains far behind. Since 2006 and until the beginning of 2014 Tesco’s MS was essentially stable (30%-32%), then it started to slip below 30%, according to data of Kantar Worldpanel reported by the BBC. Sainsbury’s has kept floating between 15% and 20%. Three challengers are notable — although they are still well below Tesco, they can and do cause trouble for the leader: (a) Morrisons (11% after a steep leap forward from 6% to 10% in 2005); (b) Asda (Wal-Mart’s branch into the UK , 17%, climbed mainly until 2005); Aldi & Lidl (MS grew more slowly from 2% to 4% until end of 2010 and then accelerated in almost four years to 8%). Kamal Ahmed, Business Editor of the BBC, suggests that the position of Tesco has been eroded due to structural changes in retail attributed primarily to online shopping, overall weakening position of the four big chains, and customers who want “smaller daily top-up shopping”. (3)

It seems early to predict if the recent slip in MS is a sign for an ongoing decline, and it depends very much on how Tesco will react. As already indicated by CEO Lewis, Tesco is going to reduce its range of products. It may have to consider the scale of its Express sub-chain, that might got too large. It will have to carefully assess if it can and should compete again hard over price with upcoming discounters or develop and enhance other competitive advantages like shopping-related services and in-store design. Tesco is already in the midst of a project to re-model and improve the layout and design of its stores (“Transforming Our UK Stores”). While part of this work is dedicated to improving their Extra stores, Tesco’s management may want to consider alternative approaches to these stores. For instance, re-arranging the store as a cluster of several autonomous shops under the same roof (e.g., food & grocery; personal care; home improvement & gardening; repairs) which shoppers can visit independently and pay at separate cashiers.

Extended Lines of Business

Tesco has added a variety of services “in a supporting role”, that is, they do not intuitively belong in a food and household merchandise retail business but they may be regarded as facilitating acquisition and fulfilling complementary needs of customers who come to shop at the chain-stores. But even under this flexible definition, Tesco may have reached too far. Consider just the next few examples:

  • Tesco Bank provides, in addition to current accounts, also savings, loans, and credit card services (even car insurance and travel services are available);
  • Tesco Mobile offers mobile telecom service packages and smartphones, and has even introduced its own-brand tablet device “hudl” (generation 2 just launched), acting as a technology company;
  • Tesco operates a network of gas stations for shoppers to fuel their cars;
  • Extending from beauty and cosmetic products for personal care, Tesco is also in the healthcare and pharmacy business, supplying medications, medical devices and NHS-approved services;
  • Internet services (broadband, e-mail & storage) are also available from Tesco.

The top management of Tesco may have to show greater scrutiny not only with regard to the range of product types it displays in its stores (and online) but also those supplementary services and products, finding a correct balance between benefit and value they provide and the burden and complication they cause.

Tesco owns the analytic company Dunnhumby as a subsidiary to perform in-house the important work of analysing purchase and personal data of Clubcard customers, and exploiting new possibilities of Big Data, to produce intelligible insights. Yet, the retailer needs to make sure that Dunnhumby keeps to its original charter. Expanding services to external clients, for instance, could complicate its activities too much, distract the company from fulfilling its vital duties for Tesco, and expose it to unnecessary business risks.

Customer Service —  Tesco is repeatedly criticised that its in-store staff is not available and helpful enough. It has been further argued that over-reliance of the retail chain on automatic self-service scan & pay posts in its stores (instead of human cashiers) signals to customers that the staff tries to avoid contact with them. These customer concerns are worrying especially given the difficulties in shopping at large and product-crowded stores. Problems with customer service may better be resolved in parallel to issues of merchandising as well as store layout and interior design to obtain greater improvement in customer-shopper experience.

Tesco has made great effort to execute an inclusive Brick & Click approach in its retailing business, not to foresake any of the physical and online channels. The retailer furthermore works to keep the channels inter-linked. It established, for example, a Click & Collect service —  to their convenience, customers can make the order online in the morning before work and pick-up the shopping package from a store of their choice (out of 260) on their way home. It is a demonstration of effort in the right direction.

Reaching Internationally — Tesco is operating store chains in twelve countries beyond the UK, either under direct ownership or through franchising and co-operation with local retail chains. Besides nearby Ireland, the group’s overseas reach is mainly into Central and Eastern Europe (e.g., Czech Republic, Poland, Hungary, as well as Turkey), and Asia (e.g., India, Thailand, South Korea). A discussion of global operations should take into account economic, cultural and legal considerations with respect to each country. For example, operations in China had to be ceased; they are expected to restart in a new formulation with a local chain. Nonetheless, the venture of Tesco in the US, that lasted between 2007 and 2013, is knowingly the most damaging and embarrassing for the company. Its Fresh & Easy chain of neighbourhood supermarkets on the West Coast was hit by a strong opposition from US-based strong retailers, mainly Wal-Mart and Trader Joe, and in addition its approach was not well accepted by the American consumers. Tesco eventually had to fold out and leave the country.

Vis-à-vis the slip in market share of Tesco in the UK, sales of the retailer at home dropped by 2.6% in first half of FY 2014/15 (Feb.-Aug. ’14) compared with the same period last year. Like-for-Like sales (same-stores, excluding petrol) fell by as much as 4.6%. However, the more alarming outcome for stakeholders and analysts about Tesco has been a decline in profit of 55% in the UK (trading profit for H1 stands at £499m post-correction out of  £23,566m in sales, a margin of 2.3%). (4)

Overall, the sales of Tesco group (£34bn) fell 4.4% and trading profit (£937m) declined 41%.  Both Asia and Europe have seen a fall in sales, though profits in Asia dropped (-17%) and in Europe they increased (+38%). Markedly, Tesco Bank  has enjoyed a rise in both sales (4.6%) and trading profit (16%), to the envy of the retailing business. Analysts doubt that Tesco can overcome and offset these declines by end of the financial year in February 2015. The upcoming Christmas and New Year season is clearly crucial for Tesco. It is also needed as an injection of optimism for its share price that fell from nearly four pounds to £2.50 in the past two years, and then dropped furthermore to just £1.50 in September, recuperating somewhat lately to a little below two pounds.

Undoubtedly Tesco has made positive moves into the 21st century to enhance the consumer shopping experience in its brick-and-mortar stores, establish its presence online, and strengthen endurable relationships with its customers. Yet, improvements it achieved have been swollen in the wave of expansion in different directions, wherever it seemed possible and connected somehow with its main field of business. It is, therefore, ever so important and desirable for Tesco to identify and focus on those areas wherein it is more competent, especially with respect to improving the quality of shopping experiences of individual customers.

Ron Ventura, Ph.D. (Marketing)

Notes:

(1) Tesco Group Interim Results: Financial Performance, H1 2014-15 (26 weeks ended 23/8/14), Press Release 23 Oct., 2014 http://www.tescoplc.com/index.asp?pageid=188&newsid=1074.

(2) Tesco Admits Accounting Missteps; Stock Slides, Stanley Reed, International New-York Times, 23 Sept. 2014

(3) Tesco Share Slumps After Raised Profit Error, BBC News: Business (Online), 23 Oct. 2014 http://www.bbc.com/news/business-29735685

(4) Ibid. 1

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