A Retail Revolution – How the Pandemic has Changed the DNA of the Retail Business

In this episode of the Zinnov Podcast, Sumit Mitra, CEO of Tesco Global Business Services talks about the current state of the retail industry and how retailers are transforming themselves to go beyond resilience to deliver value.

In this episode of the Zinnov Podcast, Nitika Goel, CMO, Zinnov is in conversation with Sumit Mitra, CEO of Tesco Global Business Services to understand how a retail behemoth like Tesco has modified its Retail DNA to become pandemic-proof. Sumit shares his perspective on the Retail industry and how it is evolving across technology and processes to cater to the rapidly changing customer needs, behaviours, and expectations.

With Resilience, comes Responsibility” – says Sumit Mitra as he gives us a view of how a large organization finds a larger purpose that transcends business to serve society as well. Sumit also sheds light on how having a globally distributed model, more specifically a hub and a spoke model, played a crucial role in helping Tesco manage its operations and customers to help fuel a retail revolution in the face of this pandemic. Listen to this episode for first-hand insights.


Transcript

Nitika Goel: Hello everyone, and welcome to a new episode of the Zinnov podcast business resilience series. I am Nitika Goel, CMO of Zinnov, and your host for today. As the saying goes, a smooth sea never made a skillful sailor. And sailing the lead ship in these turbulent times has been the retail sector. Retailers have been at the forefront of the crisis by providing an uninterrupted flow of essentials, having to pivot, and recalibrate its bearings in the wake of Covid-19. Today, I have with me, Sumit Mitra, CEO of Tesco Global Business Services. Sumit has over two decades of experience in outsourcing, client management, and business transformation – a lot of which is in the retail space. He is a technology veteran experienced in building and managing large globally diverse teams. Welcome to the Zinnov podcast, Sumit.

Sumit Mitra: Thank you, Nitika. It's a real pleasure to be here today.

Nitika: Great. So, diving right in Sumit. COVID has impacted every industry in some way or the other, and the retail industry has been no exception. So, how has it impacted it? And what are some of the key trends you've seen emerging as a function of these particularly trying times?

Sumit: Yeah, it is very interesting, we've seen some very valuable data coming out of Tesco. And obviously, different markets are different. But let me talk a little bit about Tesco in the UK, because that's kind of our biggest market, really. What we're seeing is a big change in shopping behavior. Typically, what we would see is, customers, doing small basket sizes, but making multiple trips to the shop. But, what we're seeing now is that our basket size has doubled but the volume of customers coming to the shops and the number of shopping trips have declined significantly. Another thing we have seen is that typically a customer would go and shop around, like for example, I would get a good offer from to say X retailer on fish, I will go and get my fish from there. Or I would go to a retailer who is doing good in pulses. But that trend is changing. What we are seeing is that they prefer retailers who have a bigger range, so that they can get everything in a one-stop-shop.

Also, talking about the type of food that our customers are buying, there is a lot of focus on healthy food. We're seeing an increase in the sale of vegan products, and, as you can imagine, vitamins and other healthy products. Online, we've seen our business go from 650,000 orders to 1.4 million. Is that trend going to change? No, because the demand is still there. I think even if we double it from 1.4 million to 2.8 million, we would still see filling our slots off, because there is still a huge demand for online shopping. As I said, we are seeing a lot of one-time and weekend shopping rather than daily shopping. So, there's been a number of changes, that we are seeing in terms of customer behavior; whether this is going to last or not, is difficult to say. But I think the important thing for us is, whether they're buying online, or whether they're buying through stores, we continue to make the shopping journeys incrementally better for them. I think by ensuring that, you'll be able to retain your customers for the long term.

Nitika: Very interesting insights, Sumit, on how customer journeys are moving online, and that there is a significant change in customer behavior. So, my next question to you is that Tesco is a century-old, billion-dollar retail company. One might even assume that you have a very traditional outlook on how you do business. So, how did Tesco, and more specifically your business group, manage the changes that were wrought by this pandemic?

Sumit: Absolutely. I mean, if you think about Tesco, being in retail, and especially in food retail, makes us pretty resilient as an organization. So, the impact on our business in terms of revenue was more positive than negative. But with this resilience comes a lot of responsibility. Because we have to feed nations. We are across eight countries, and it's really important to support those customers through these difficult times.

Just to share with you some statistics, at one point in March, we had almost 52,000 of our frontline colleagues, who were either classified as vulnerable, or were off sick, or showed symptoms of COVID, or they had to stay at home; which meant that it created a lot of issues for us to serve our customers. So, we acted very quickly. We brought in almost 48,000 new colleagues to come in on a temporary basis to support that peak in volume. If you remember, around March, April, was when COVID was at its ferocious best, and we had to react because, typically, a food retailer would go through a little bit of a lull after Christmas. What we do is put out a lot of promotions, multipack buying, etc, etc. But when your customers are panic buying, what you don't want to do is bulk selling, because it would be very irresponsible of you to do so. You want to make sure that food is available to all.

There was also a huge demand from an online perspective. So, Tesco typically does about 600,000 orders a week. That ended up reaching 1.3 to 1.4 million orders a week in the next two and a half months. We almost doubled, more than doubled our business, in the online channel. There are social distancing measures that we need to do in our shops, and also deal with legislation changes. So, there were a number of things that we had to tackle as individuals. So, it brought a lot of volumes back into business services. Now, what was really important was that, if ever the business needed business services the most, it was right here, right now. So, we couldn't let the business down. We had to ensure that we deliver everything and beyond as it says on the tin. Because, what was important during this time was that we connect to our purpose, our purpose in Tesco is to serve our shoppers a little better, every day. And what was important was that how do we rally our troops in Business Services who are miles away from say, UK, and are not used to dealing with Tesco customers on a daily basis; especially, colleagues that are sitting in India. So, what I did was connected our colleagues to a purpose, the purpose was serving our shoppers a little better, and the responsibility of feeding nations. And what I said to our colleagues was, this is an opportunity of a lifetime, an opportunity to feed nations. And what was amazing was that, everybody, it didn’t matter whether you're doing payroll, finance, or managing customer and product operations, everybody was geared to feed nations, and their focus was on how do I ensure we serve our shoppers a little better.

And as I said, it created volume. We had to get 5500 – 6000 people across four countries and get them to work from home. In India, it was more difficult because our colleagues did not have broadband or connectivity at home. We provided 700 to 800 broadband lines to our colleagues’ homes and supplied a number of other tools. For the work from home setup, we had to uplift our infrastructure to ensure that we can deal with video conferencing, etc. So, we had to do a lot of work. In terms of our operations, if you think about our payroll team, they had to deal with extra 48,000 new heads, and continue to deliver sick pay to the 52,000 people who were off sick. So, it created a lot of turmoil; and these people work above and beyond to support this. When I talk about promotions, our team in Bangalore does a hundred percent of all promotion launches in Bangalore for the UK market, and we had to take off almost 30,000 to 40,000 promotions over a weekend. So as you can imagine, our contact center in Dundee in Scotland started taking over 500% more volume of calls, especially from our grocery shopping perspective, because there were a lot of anxious customers out there, and vulnerable customers out there. So, to deal with the volume, and to not have customers waiting on the call for one hour to get it answered, we had to hire 800 new colleagues in three weeks and get them ready to support our customers. So, it's been an incredible journey for us to kind of support the business. And as my CEO would say, Tesco Business Services globally hasn’t missed a single heartbeat.

Nitika: Fantastic Sumit. You shared some really great points. And I especially liked the phrase, ‘with great resilience comes great responsibility’. You beautifully laid out what's the intention, the purpose, and in the larger scheme of things what will translate into outcomes; not just for your business, but also the experience that your end customers will be left with. So, Sumit, clearly GBS or the Global Business Services has played a key role for Tesco in these trying times. It would be great if you could share a few anecdotes with us as to how this globally distributed model helped you build resilience.

Sumit: Absolutely. In Booker Group (BG) I created the global business services across nine countries, and it was based on having a hub and spoke model. So, what we did was, we built two hubs in Tesco, two and a half hubs rather – we have a key hub in Bangalore where all the work sits. If there are specific language requirements, then we look at a spoke model, which is slightly smaller in size, and we build a Center of Excellence. I'll give you an example. So, I believe that consumer calls need to be taken from the country itself because the customer can relate and that's really important. So, all our UK customer contacts, whether it's on emails, on chat, on voice, or on social media, it's all managed by a team in Dundee. The calls for Central Europe, we're across four countries in Central Europe, that's all managed from our hub from Budapest. Budapest is not as big as Bangalore, but it has a headcount of around 250 to 300, and we will grow up to a maximum of 400. But what it does is that it speaks the language, and connects to the local customers. So, what's important from a hub and spoke model perspective is, you decide why you want it – Is it because of Business Continuity Planning (BCP)? Is it because of the proximity to the customer or your stakeholders? Or is it because of language? And then you need to decide why it needs to go and how it needs to go. It's also about the right resource, at the right place, at the right time, and at the right cost.

I think during the pandemic, what has really helped us is that we were able to flex up and down as we saw fit. Like for example, in India, as you know, for Indian contact centers we needed DoT (Department of Telecommunications) approval to move work from office to home, and that took time. We had to work with NASSCOM, and authorities to get that approved. But then our store colleagues had to make those calls when they have issues within the stores. At that point when they were inundated with customers and people, there was either a long waiting time or they couldn’t reach the help desk. So we were able to manage and route some of those calls to Dundee, which helped us to get some relief temporarily while we were sorting out our infrastructure in India, and then take those calls back into India. So, hopefully, that makes sense.

Nitika: Great points, Sumit, and it's been just amazing how Tesco has come together for the bigger purpose, to ensure seamless customer experience, despite the current challenges. Thank you for being with us, and sharing these great insights with us – some very interesting points around the evolution of your customer journey, how it has moved online, and how you don't see this trend diminishing. I think our listeners have got a good sense of how the overall retail industry has undergone a massive change, and how a company like Tesco, a behemoth like Tesco, is navigating through these changes and showcasing not just its business resilience, but its antifragility as well. Thank you once again for being with us, Sumit, and it was great to have you here.

Sumit: Thank you, Nitika, it's been a real pleasure talking to you. Thank you.

Nitika: For our listeners, don't forget to tune into part two of this conversation, as Sumit shares more insights on the operational nuances of the global service center, and how it was leveraged to deliver large scale outcomes, especially when it mattered the most. Thank you to our audience for tuning in to this episode of the Zinnov podcast.


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