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Tesco outlines some of its IT spending plans for 2011

Tesco is to continue using technology as a key differentiator against its competitors as it reveals some of its plans for IT innovations and implementations in 2011. By Glynn Davis

GENERAL MERCHANDISE

Tesco outlines some of its IT spending plans for 2011

Speaking at the recent Wincor World event in Paderborn, Germany, James McNulty, head of global IT procurement at Tesco, highlighted how the group was using the latest technology to not only drive innovation in its business but to also help it standardise processes across its increasingly global operations.  

Although the group attempts to create a local feeling around the world to its proposition, McNulty says the “processes are standard” and that best-practice in one country is ultimately used around the globe to bring a standardisation to its infrastructure.

“We have a common infrastructure - across things like tills, and servers. We have Clubcard being rolled out aggressively, there is a common ordering system that is deployed in each new country at a cost of only £2 million, and the stock reduction programme from the UK has also just been rolled out,” he explains.

Helping this strategy is the global relationships Tesco has with its 11 key global IT suppliers that include Wincor Nixdorf: “This helps us develop better solutions across the globe, helps us to create simpler procedures for our staff, and helps us leverage our scale to make Tesco cheaper to our customers.”

These relationships are also the key to driving innovation within Tesco, according to McNulty, who says “innovation is critical” and that “if say Wincor wants to trial things then we are interested”. He cites the technology company’s tunnel scanner as an innovative technology that is “very exciting and the group is interested in doing a trial”.

Twenty cameras are used in each tunnel scanner to automatically scan 60 articles per minute, with an accuracy rate of 98 per cent, which would provide Tesco with another alternative at the Point of Sale (PoS).

“We’ve been looking at it for four years [when it was a very big scanner]. There are some advantages and some concerns but we’ll see if customers like it [when it is trialled]. We are embracing innovation but there is no point in putting things that the customer doesn’t want,” he says.

This is one element of activity at the till as Tesco is also expecting to take delivery of up to 10,000 Wincor Nixdorf Beetle PoS solutions through 2011 in the UK to add to its existing base of 25,000 units.

Tesco is also experimenting with self scanning technologies whereby customers scan each item with a reader as they do their shop. This is now being trialled in a store in Romford and uses technology not dissimilar to that being used by Waitrose and by Safeway many years ago in a limited number of its outlets.

The use of such technology is increasingly accepted by shoppers as they are becoming used to scanning barcodes with their smart phones. This acceptance has led Tesco to introduce three ‘applets’ for mobile phones – a store locator, a product locator, and a product scanning tool.

Another innovation to possibly hit Tesco stores later this year could be contactless payments, which McNulty reveals Tesco is “looking at” and has a RFP (Request for Proposal) out in the marketplace. “We’re looking to see what the cost is for new readers. We are looking at the overall cost – the hardware, maintenance, and the costs all round,” he says.

There will also be further investments made in the technology used by the group’s dotcom division: “We’re redeveloping the dotcom offering as there is a desire to be much stronger and we are merging online more with stores.”

Part of this has been the move away from an in-house e-commerce platform to a solution from ATG. “We’ve signed up and are developing it now. It will be interesting to see how it goes. It’s the future,” he suggests.

As Tesco also expands its non-food operations McNulty says this will drive further investment in IT as these areas typically require different technology requirements to that of the group’s food business.

“Over the next 12 to 24 months we’ll be looking at new systems for other areas of the business. Speculating, this could involve stock management and delivery systems for dotcom and price optimisation solutions – which is just being scoped,” he reveals.

Although McNulty says the budget on IT spending in 2011 will not be increased on last year he suggests that Tesco hopes to “get more for the same money”. The company will no doubt be helped by its increasingly strong negotiating position as it continues to grow at a significant rate.
And there will undoubtedly be strong support from incoming chief executive Philip Clarke who has, under long-standing chief Sir Terry Leahy, been the Tesco main board member with IT responsibility.

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