Supermarkets: Tesco's move to become the choice of young professionals puts it in the top slot

It is the biggest of the `big four' supermarket groups. Tesco was once seen as downmarket but led the reshaping of British shopping through out-of-town sites and loyalty cards. What next, asks Jojo Moyes - Internet shopping and Calvin Klein? (Yes, actually.)

In the early Eighties, Heathcote Williams wrote a poem called "The Tesco Chainstore Massacre". Its punchline runs: "The people who run Tesco must be Buddhists: there is nothing you could possibly want."

He would not be writing that now. From a "pile- 'em-high-sell-'em-cheap" outfit, regarded by many as irredeemably naff, it has reinvented itself as the supermarket for the young professional. Possibly no other supermarket group has undergone such a public transformation.

Two years ago, it toppled Sainsbury from the top slot, and has been going from strength to strength ever since, largely on the back of its "unbeatable value campaign", loyalty scheme and a whole range of initiatives that have changed the way supermarkets view customer service, such as the "one in front" pledge to keep checkout queues under control.

The transformation of Tesco into its current slick, service- oriented operation - including the in-town Tesco Metros and the 24-hour Tesco Express shops with petrol stations - began with its best-known face, Sir Ian MacLaurin, who left to help rejuvenate British cricket.

In 1959, the young MacLaurin met Sir John "Jack" Cohen, the supermarket's founder, and swiftly won himself a job. By the age of 30 he was Sir Jack's appointed successor, responsible for the decision to abandon the use of Green Shield stamps in an attempt to go upmarket.

Sir Ian can be credited with turning the supermarket's fortunes around with his "operation checkout" which redesigned the layout of shops and then discovering the potential of out-of-town sites. He is one of the people behind the great and highly controversial reshaping of town and country for car-based shopping. But, beyond that, Tesco began to examine customer's interests, such as healthy eating, ethical consumerism and exotic holidays, and made sure its shelves reflected at least some of that.

The change accelerated with chief executive Terry Leahy, when Tesco began its move into financial services two years ago with the launch of Clubcard, Britain's first supermarket loyalty card. Mr Leahy, a Liverpudlian who has retained his Scouse accent and passion for Everton, is a "convinced populist" who understands the needs of the modern working family.

Described by one analyst as "the hard man of groceries", Mr Leahy is one of the most powerful people in the country, though heal revels in his ordinariness. He lives with his working wife and three young children in Ponders End, near the Tesco headquarters in north-east London, and says: "We have children, we live in the suburbs, we're short of time - that's absolutely typical."

Mr Leahy's "common touch" enabled him to see that customers would respond to a loyalty card, even while Sainsbury was notoriously dismissive about the idea. Loyalty cards, described in the trade as "stealth micro marketing", allowed Tesco to get up close to its customers without them knowing.

Under Mr Leahy, Tesco's belief is that as there can be only a limited increase in the market for groceries, the growth areas will be in better service and wider choice. So it has focused its efforts in financial services, toiletries, health care and leisure interests. It has also worked on developing its ethical consumer niche. The recent report by the charity Christian Aid on supermarkets and ethics said Tesco had made more progress than any other such group over a 12-month period.

Mike Dennis, food retail analyst at Societe Generale Strauss Turnbull, says that Tesco is probably "furthest down the line" in terms of looking at what the customer wants, and developing unique products like longer opening hours, electronic shopping and home delivery. But, he said: "I don't think [home delivery] is going to be the big thing for them in next couple of years because it depends on fax machines and technology. Whereas at Iceland, for example, there's a low technology approach - you go round the supermarket, then they bag it up and deliver it to your home.

"Then again, you get the sophisticated career woman or bloke, they're the type of people who like Tesco Direct. So who knows?"

Another high-profile development has been the selling of high-quality brand-name clothes from manufacturers such as Levi and Calvin Klein.

"Levi, Calvin Klein etc don't like it because they feel their clothes need to be sold in an environment where shop assistants know about their products. It's not luxury goods, it's deemed as a bargain," said Mr Dennis. "But it works in getting the consumer into the store. Consumers will actually say, `Oh there's a third off such and such at whatever store, I'll go to that'."

Not everything has worked well. Tesco received numerous complaints that it was caught out by the flood of demand for its savings accounts. Questions have also been asked about its ability to retain its increasing market share, as other supermarket groups swiftly copy it. Mr Leahy, the hard populist, and his team are only as good as their last good idea.

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