Tesco 'eroded customers' trust', says Sir Terry Leahy

Tesco "eroded" the trust of its millions of customers according to former chief executive Sir Terry Leahy, who argues that its failure to offer low prices and the best deals for consumers led shoppers to defect to cheaper retailers.

Sir Terry Leahy: told the BBC's Panorama that Tesco has eroded customer trust
Sir Terry Leahy: told the BBC's Panorama that Tesco has eroded customer trust

Leahy, who was interviewed for the BBC’s Panorama broadcast last night (19 January) laid the blame on Tesco’s management, including his successor Philip Clarke.

He told the Trouble at Tesco programme that the supermarket's loss of reputation for low prices forced customers to shop around, while management "took the finger off the pulse of the customer" and placed "too much reliance on short-term promotions".

Leahy told the BBC: "Tesco is the biggest, people expect it to have the best prices and know they can trust Tesco to deliver that and not have to shop around and check that they're getting the best deal."

He also said tension at the top led to rows among senior management, while the loss of "too much talent" created a management structure that was spread too thin.

He told the programme: "I think the culture did change under Phil Clarke and not for the better. I think if you talked to people who knew Tesco, worked in Tesco when I was there, actually the culture was pretty positive and it has to be because it employs half a million people and you can't make them do things, you have to motivate them to do things, they've got to want to do it."

Leahy is largely credited with building Tesco into one of the world’s largest and most successful retailers, overseeing strong sales and large profit margins.

Leahy said: "When you're the CEO, if it goes well, you get credit, if it doesn't go well, you must take responsibility and Phil Clarke has taken that responsibility and paid the price with his job."

Meanwhile, in his first public statement since leaving the retailer in June 2014, Clarke said he needed to change the business when he became chief executive in 2011, "because of issues that had been building for some time", adding that the model of a "multichannel" Tesco had the full backing of the board.

It is not a vision shared by Clarke’s successor, Dave Lewis, who has been stripping the business back to its core, divesting peripheral divisions such as BT Broadband and Blinkbox.

Panorama also revealed that cosmetics group L’Oreal threatened Tesco with legal action over a demand from the supermarket to pay £1m.

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