Tesco became Britain鈥檚 biggest retailer by cutting costs to the bone, and that applies as much to store refits as pineapples. Katie Puckett met the development director who makes sure none of its 拢1.8bn construction budget gets wasted
If you鈥檙e working for Tony Vasishta, kiss your lie-ins goodbye. Tesco鈥檚 development director starts early and he鈥檒l make sure you do too. 鈥淚 often get into my car at 10 past six in the morning and I forget it鈥檚 not a sensible time to call people. The number of times I鈥檝e pushed in the number and I have to hit cancel because it鈥檚 too early 鈥︹��
The other week he set a personal record: 鈥淚 got in my car and phoned one of our contractors and started talking about work. He said 鈥楾ony, do you realise its 5.15am?鈥欌��
You don鈥檛 get to be the UK鈥檚 biggest retailer by sleeping on the job. Tesco鈥檚 bosses know it is low prices that lure 30 million people through its checkouts every week and it keeps a gimlet-eye on cost in every aspect of its supply chain, including construction.
This year Tesco will spend 拢1.8bn on store development, wringing out every last penny to squeeze margins and boost sales. Vasishta says he鈥檚 always looking at new firms, though few make the grade and not everyone wants to work in such a price-conscious regime.
Vasishta joined Tesco from Boots The Chemist six months ago, and already he has been absorbed into the 24/7 culture. 鈥淚鈥檝e always worked this hard, but the difference here is that everyone around me works as hard,鈥� he says. This year Tesco will open 2.2 million ft虏 of new store space. Vasishta says he has 鈥渢ens if not hundreds鈥� of developments on site at any one time and expects to do even more next year.
Tony Vasishta
Photo: Libbi Pedder
Battle for the high street
Tesco鈥檚 assault on the UK鈥檚 high streets and retail parks is continuing, despite an inquiry by the Competition Commission, the second into the supermarket sector in a decade. It is looking at the aggressive expansion of the big four 鈥� Tesco, Asda, Sainsbury鈥檚 and Morrisons 鈥� of which Tesco is by far the biggest. Wherever it submits a planning application for a new store, fierce protests from residents and local retailers follow.
Vasishta isn鈥檛 involved in expansion strategies or planning disputes 鈥� he just builds and refurbishes the stores. 鈥淭he big things on my agenda are minimising disruption to trading stores, the speed of construction and driving costs down. We task ourselves with reducing our building costs every year. That鈥檚 a hard thing to do, with inflation and the price of steel going up.鈥�
Neither is he bothered by Tesco鈥檚 reputation for bullying its suppliers. 鈥淚 honestly don鈥檛 believe we do. We鈥檙e demanding, I wouldn鈥檛 pretend that we鈥檙e not. We鈥檙e obsessed with delivering the best service for customers, and that means the best prices. The only way of doing that is to get the best prices from our suppliers. But people have a choice, they can work with us or choose not to and every company I come across wants to.鈥�
So far, the retailer has met its targets through innovations developed with its contractors. According to Vasishta, many were suggested by the firms. No stone is left unturned: 鈥淚f I look at a trolley bay in a car park, we might reduce the number of panels, lower the height or standardise the colours. Every change can have a cost implication.鈥�
Tesco is increasingly using off-site construction to speed up projects and cut disruption and, most importantly of course, cost. It uses e-tendering to buy materials, which is unpopular with suppliers because of the stark attention to price. But Vasishta denies that鈥檚 the only consideration. 鈥淚t鈥檚 good because it gets everyone down to their best price within a few minutes. After that, you can look at quality, speed, relationships.鈥�
Every little helps
One of Vasishta鈥檚 latest projects is to standardise prices for works under 拢2-3m. 鈥淏ecause the scope of those works is fairly limited, there鈥檚 no reason why we can鈥檛 have a standardised rate card for most of the items. We鈥檙e tendering the schedules and then we鈥檒l standardise them.鈥� He also wants to get main contractors fitting shelving.
Vasishta says Tesco is the most customer-obsessed of all the retailers he has worked for in his 12 years in the sector, which includes stints with TK Maxx and Woolworths as well as Boots. He puts its success down to constantly listening to what customers want. Vasishta himself loves shopping 鈥� he has dozens of pairs of shoes 鈥� and is clearly a retail natural. It turns out he used to have a market stall in London鈥檚 East End.
The Kensington store we鈥檙e in today is coming to the end of a 拢3m refit by Styles & Wood. During our photoshoot, he helps a customer select a ripe pineapple, invites curious children to join him and fields criticism of the refit from a customer who can鈥檛 find what he鈥檚 looking for. 鈥淲e鈥檙e not finished yet 鈥� is there anything you can鈥檛 find?鈥� he asks, but the man has stomped off.
鈥淭hat鈥檚 part of the challenge of trying to keep everybody happy all the time,鈥� he notes philosophically, before returning to his usual upbeat tone. 鈥淎t least he noticed we鈥檇 done something. Hopefully in a very short space of time, he鈥檒l feel as passionate about the new layout as he did about the old one.鈥�
Vasishta wants construction firms that are as concerned about their 30 million indirect clients as he is. If they鈥檙e not, sales figures show the difference. During projects, he examines them weekly at least and daily when there鈥檚 disruption to customers.
As the Competition Commission inquiry proceeds, Tesco鈥檚 place in the community is the target of a PR campaign. Like Asda and Sainsbury鈥檚, it is trying to convince detractors that it鈥檚 a force for good. In May, chief executive Sir Terry Leahy announced a 10-point plan that included greater consultation with communities, halving the energy used in stores by 2010 and a 拢100m fund to develop sustainable energy sources.
It has already unveiled two eco-prototypes, one in Diss, Norfolk, opened last November with windmills out front; and in May, a follow-up in Swansea that uses natural light, combined heating and power plants and photovoltaic cells. Both use one-third of the energy of a normal store and Tesco will keep 鈥渢weaking鈥� the technology to improve further.
It has planned a third store built from 鈥渞ecyclable鈥� materials in Aylesham in Norfolk, but the planners weren鈥檛 keen on the timber cladding. 鈥淭hey wanted brick and tile so it looked the same as the other buildings,鈥� says Vasishta. 鈥淭he important thing is that we listen to customers and make buildings work with their environment.鈥�
Whatever it does, Vasishta says Tesco has become 鈥渢he Marmite of British retailing鈥�: loved and loathed in equal measure. But he鈥檚 not worried. 鈥淚f we keep on doing the things customers want, we will be okay. Nobody makes light of the competition inquiry, but it doesn鈥檛 detract from our day jobs because we don鈥檛 believe we鈥檝e done anything wrong. We鈥檙e an easy target, but we fight fair.鈥�
Tesco at a glance
Build programme
Tesco will spend 拢1.8bn on construction in 2006. It opened 2 million ft虏 of store space last year and will add 2.2 million ft2 this year, much of it on new mezzanine levels within existing stores. There will be a further increase in 2007.
This year it will open 140 stores, mostly of the Express convenience type, but there will also be 25 Extras superstores, some new build, some expansions of existing stores.
Who it works with
Tesco has frameworks for contractors and consultants. Its 鈥淕5鈥� main contractors 鈥� Costain, Barr, Taylor Woodrow, RG Carter and Kier 鈥� pick up the bulk of the work, which is projects worth more than 拢5-6m.
It also works with a number of smaller fit-out contractors including Styles & Wood, Pearce, Dudleys and Britannia Construction. Vasishta says he looks for new firms all the time.
Cost consultants include Gleeds, Faithful + Gould, Turner & Townsend and Bucknall Austin.
Procurement
Tesco generally uses design-and-build contracts or a variety of other methods.
鈥淲e probably need to get a bit cleverer on some of that. It depends on the size of the project. We鈥檙e building an enormous distribution centre in Scotland using a traditional two-stage tender and we鈥檒l complete most of the design before we start on site. When you鈥檝e got the time to do that, it鈥檚 a real luxury. But we rarely have the time. Usually we鈥檇 run with D&B.鈥�
People
Vasishta has a design and implementation team of 50 staff, with another 30 external project managers seconded from its contractors. He reports to Neil Sachdev, Tesco鈥檚 property director.
What Vasishta wants
What do you look for in a construction firm?
Price, commitment, passion. You鈥檝e got to have a really great attitude to customers and be prepared to help. If I鈥檓 standing around and someone asks me a question, I鈥檓 not going to say 鈥業鈥檓 the development director, I don鈥檛 do onions鈥�. Lots of companies want to come and work for Tesco because they know we do a lot of work, but they鈥檝e got to be able to demonstrate a retail pedigree.
How can firms without retail experience break into the market?
If they鈥檙e able to demonstrate a real desire, either by employing people with retail experience or by working with companies that do. In some stores we鈥檝e brought companies on for a smaller projects to begin with; they don鈥檛 all start doing big fit-outs.
How serious are you about sustainability?
Wherever we鈥檙e building a new store, we鈥檒l consider using renewable energy or sustainable materials. We can鈥檛 afford to make stores unfeasible in terms of cost but we are looking hard at how we move materials, where we source them from and how recyclable they are. We鈥檙e working on using timber frame in a couple of buildings. But the government needs to be joined-up about this. They say they have a commitment to renewable energy, but the planning authorities are not very comfortable with large windmills, and small windmills generate almost no usable energy.
Postscript
To find out more about the big four retailers鈥� construction plans, go to the archive section
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