ASA Adjudication on Tesco Stores Ltd

Ad

A national press ad, for Tesco, stated "Great deals on electricals this Easter weekend at Tesco" and featured boxes that showed five different products. Text stated "Medion GoPal PNA Sat Nav, Half Price ... £59.97 Offer ends Monday ... Dyson DC08 Origin Half Price ... £99.48, Offer ends Monday ... Samsung 37" HD Ready Digital LCD TV, £599.97 ... Servis Washing Machine 1200 spin, £99.97". Further text stated "Hurry while stocks last ... Selected stores. Also available on www.tesco.com/direct". Small print stated "Offer strictly limited to a maximum of one of each item featured per customer. At selected Tesco UK stores, subject to availability".

Issue

Argos Ltd challenged whether Tesco had sufficient availability on their website of the advertised:

1. Sat Nav;

2. Dyson vacuum cleaner;

3. Samsung TV; and

4. Servis washing machine.

CAP Code (Edition 11)

Response

Tesco said the promotion ran over the Easter holiday weekend (Thursday 5 April to Monday 9 April).  They said, for some of the products, the prices offered represented the lowest ever prices for those products in the marketplace.  They said when they planned the promotion they were aware that demand for the products was likely to be high and they took steps to ensure that they made clear that stocks were limited and that all customers had a fair chance of being able to purchase the products.

They said they had reviewed previous sales and promotions of the advertised products, or similar products, and based on those sales, ensured that sufficient stock was available to meet what they considered to be the highest likely increase in demand for the promotion. In addition, they said that to ensure as many customers as possible were able to take advantage of the offers, they had limited customers purchases to one of each product.  They said the offers were also made available to customers via their online business, Tesco Direct.  They said as a starting point they looked to allocate stock proportionate to their usual sales.  Therefore if Tesco Direct usually sold 15% of the total then they had aimed to allocate 15% of the available stock to Tesco Direct.  They said they had also considered that if stock ran low, it would be less inconvienient for online customers, who would not have travelled to a store.  They said they could also more easily communicate an out-of-stock message online to manage customer expectations.  They said they had therefore considered that it would be prudent and appropriate to weight the allocation in favour of stores.  

Tesco said they were careful to limit the amount of advertising about the promotion and to communicate the limitations of the offer to customers.  They said the press ad was the only one planned to promote the promotion.  They pointed out that it prominently stated "Hurry while stocks last" to make customers aware that stock was limited.  They believed customers would therefore understand the nature of the promotion. They said the ad appeared on 5 April only; it had been due to also appear the following day but because of extremely high sales on 5 April they decided not to run it on 6 April.

Tesco said they had been able to maintain the online stock of the sat nav and the laptop throughout the promotion.  However, stock of the TV, Dyson and washing machine did run out.  They said once those products went out of stock they immediately updated their website to show an "out of stock" message to avoid, as far as possible, frustration for their customers.  Tesco said they were confident that the reason those products went out of stock was not due to inadequate planning but rather a combination of exceptionally high demand and errors that led them not to be able to offer customers the stock that they had expected to have available.

They explained the situation for each of the products in turn:

1. They said they had been able to make enough units of the sat nav available to Tesco Direct to cover a 1,340% increase in sales for the promotion.  They said there were still units in stock at the end of the promotion and they had therefore had more than sufficient stock available to meet customers demands.  However, they said that for a short period on 5 April (between 9 am and 11.20 am) their website showed the sat nav as out of stock.  They said that was due to a shipment of the sat nav being received into their depot later than expected, which meant that their stock tracking system believed they had less stock available than was the case and the system automatically displayed the 'out of stock' message.  They said their staff had closely monitored the promotion throughout 5 April and up until 9 am the sat nav was still showing as in stock.  They said that when the system had started to show the 'out of stock' message, staff had acted to amend the system and it had been rectified at 11.20 am.  They said they regretted that the error had occurred but pointed out that customers (and competitors) who had monitored the site would have seen that the product was back in stock by 11.20 am.

2. Tesco said the promotion offered the Dyson model at the lowest price that had ever been offered by a UK retailer.  They said they therefore had little sales history on which to base expected demand.  They said they assessed the levels of sales of the Dyson vacuum cleaner prior to the promotion and based on those sales they allocated sufficient stock to cover a 1200% increase in sales during the promotion.

They said, however, that they did not receive the full amount of stock they had ordered from their supplier. They said that stock had still been available in stores but it was not possible to move the stock back to the depot to sell through Tesco Direct.  They also said sales on Tesco Direct on 5 April were over 5000% higher than previous daily sales.

3. Tesco said they had allocated sufficient stock of the TV to cover an 8750% increase in sales.  However, they said their supplier had been late in supplying the product and they therefore only had a small proportion of their ordered stock available for the promotion.  That stock was not sufficient and the product sold out on 5 April.  They said it was regrettable that they had sold out but pointed out that it was due to circumstances beyond their control.  In addition, they said that, based on in-store sales, if they had received their full order of stock they would have had more than enough stock to meet demand.

4. Tesco said they were able to allocate enough stock to cover a 2000% increase in sales for the washing machine, which they considered to be a reasonable estimate of the possible increase in demand for the product.  However, they said that due to an ordering error, they were only able to secure approximately half of the stock allocation that they had expected to receive.  They said they were not aware of that error until 5 April, after the ad had been published.  They said that unfortunately that error was compounded by extremely high online demand (6400% greater than usual daily sales) and that exhausted their available stock before they were able to take any corrective action.  They said there was, however, still stock of the washing machines available in their stores.

Assessment

1. Not upheld

The ASA noted Tesco had taken steps to estimate the likely demand for the promotion and had withdrawn further advertising of the promotion after it had become apparent that demand was higher than anticipated.  We noted their website still had sat nav units in stock at the end of the promotion but that an out of stock message had appeared for a short time due to technical problems.  Although we noted the error could have caused some unnecessary disappointment, we also noted Tesco had corrected it quickly through their monitoring processes.  Because Tesco had made a reasonable estimate of the demand for the sat nav, which was demonstrated by the fact that there were still sat nav units in stock at the end of the promotion, we concluded that the ad did not breach the Code.

On this point, we investigated the ad under CAP Code clauses 7.1 (Truthfulness), 16.1 (Availability), 27.3 and 27.4 (Sales promotion rules), 30.1 and 30.2 (Sales promotion rules: availability) but did not find it in breach.

2., 3. & 4. Upheld

We noted Tesco had based their estimates of demand on a 1200% increase in the weekly sales of the Dyson at the normal price, a 8750% increase for the TV and a 2000% increase for the washing machine.  We noted the sales on the day represented a 5000% increase in the daily sales of the Dyson and a 6400% increase for the washing machine and that those products, as well as the TV had therefore sold out by the first day of the promotion.

We acknowledged that Tesco had made clear in the ad that stocks were limited and that they had withdrawn further advertising to avoid disappointing consumers.  We noted they had little sales history on which to base expected demand for the Dyson and had decided to allocate stock on the basis of a twelve-fold increase in the normal daily sales.  We noted they believed their estimates for the TV would have been sufficient to meet demand if they had received their full allocation of stock.  We also noted stock of all three products were still available in their stores.

We acknowledged Tescos assertion that they had not received their full allocation of stock due to problems with their supplier, or due to ordering problems in the case of the washing machine, but we noted they had not provided evidence of those problems.  We welcomed the fact that Tesco had made clear in the ad that stock was limited, but considered that that did not relieve them of responsibility for taking all reasonable steps to avoid disappointing participants.   Although we considered their allocation of stock was reasonable in the circumstances, because we had not seen evidence to demonstrate that the problems with the supply of that stock were outside their control we concluded that the ad breached the Code.

On these points, the ad breached CAP Code clauses 7.1 (Truthfulness), 16.1 (Availability), 27.3 and 27.4 (Sales promotion rules), 30.1 and 30.2 (Sales promotion rules: availability).

Action

We told Tesco to ensure that they had sufficient stock to meet demand for future offers.

Adjudication of the ASA Council (Non-broadcast)