'Tesco failed to understand the Chinese consumer'

05-Sep-2013 - Last updated on 06-Sep-2013 at 09:26 GMT

Chinese consumers failed to respond to 'Tesco's secret weapon', said marketing expert Qing Wang

Tesco’s decision to step back from going it alone in China was because it failed to understand the Chinese consumer and how unsuited they are to its so-called “secret weapon” – the clubcard, according to a leading marketing expert.

Qing Wang, Professor of marketing and innovation at Warwick Business School, which is part of the University of Warwick, said Tesco should have looked into the cultural differences in China before investing in the second biggest economy in the world.

She said Tesco – which turned up late to the party in China compared with retailers such as Walmart and only opened its first store in 2004 – mistakenly believed its clubcard would give it an advantage over local rivals.

Tesco recently announced it was in talks with China Resources Enterprise (CRE) about merging their stores in China. Tesco, which runs 131 stores in China, would control 20% of the new chain, while state-run CRE, which owns 3,000 stores in the country, would have 80%.

$3bn acquisition

News has since emerged that Tesco, together with CRE, is in talks with Hong Kong supermarket chain ParknShop about a $3bn acquisition.

“The value of the clubcard or indeed any loyalty programme in the Asian market may have been grossly overestimated,” said Wang. “Research my colleagues and I have carried out [publication forthcoming] in an Asian market with similar demographics and purchasing power to that of China's large cities reveal consumers to be ill-suited to the clubcard approach.”

The research found that almost all consumers participated in at least one loyalty programme and 63% of those who participated in loyalty programmes had loyalty cards from four or more retailers. They believed larger choices gave them more power of control, more chances to have programmes that suit their needs and a more satisfying shopping experience.

Read more about Tesco's merger activity in China here.