Wednesday, 1 July 2009

The Joy of Tesco

There is a report on the front page of The Times today which claims that Tesco may be the surprise buyer of Northern Rock. For those who don’t know, Northern Rock is the bank taken into government ownership in early 2008 BEFORE all the other banks started to fail. They were running short of funds and customers started queuing up outside branches to withdraw their money – the first run on a bank in Britain for many, many years. It was taken into government ownership to safeguard the remaining depositors, much to the chagrin of the shareholders.

There are other potential buyers in the market, but the fact that Tesco is there, looming large, I actually find quite scary.

Tesco is by far the largest retailer in the UK, the third largest in the world by volume and the second largest in the world by profit. It’s reckoned by some that one in every four pounds spent in Britain is paid over to Tesco in some capacity. The one-time food retailer is now vast, selling everything from TVs to DVDs and from Petrol to Car Insurance. They even already have a ‘personal finance’ division selling loans, credit cards and savings products. So the purchase of Northern Rock would see them enter the current account and mortgage markets too.

With Tesco also putting Costa Coffee branded areas in their shops and already supplying pharmacy and optician services, AND putting out the idea of offering Estate Agency and Legal and medical services IN STORE, it could soon be possible to ‘pop in’ to Tesco to buy a loaf of bread and a bottle of milk and walk out having purchased a house from the estate agent, with a mortgage from Northern Rock dealt with by a lawyer in a Tesco uniform, then get some new glasses, see a doctor about that dodgy knee and get the drugs to cure it, pop back to the lawyer to write a will in case you die on the way home, before sitting down to have a coffee before filling up the car insured by Tesco with Tesco petrol before driving back to the house you’ve just put on the market and expect to sell within a couple of weeks.

Tesco is, in my opinion, just getting too damn big. I can envisage a time when this country ceases to be the United Kingdom and gets re-branded as United Tesco or Tescain. For me, it’s worrying that one business could have such a dominant position not just in one market, but in almost all of them.

Think books. Most of you will know me as a writer. I write e-books, which are sold globally online and I don’t have anything ‘in print’ so to speak. But here in the UK the print publishing market is now dominated by Tesco as the largest retailer of books. It’s not that they carry all that many titles, you’ll still find a hell of a lot more in a Waterstones or even a WH Smiths, but Tesco sell the largest volume because it’s easy to pick up that new bestseller everyone’s talking about when doing your weekly food shop. So while it’s a great sales boost to get on the Richard and Judy reading list, it’s probably more important to publishers to get a book onto Tesco’s shelves. This is why, I believe, we’re seeing more and more ‘celebrity’ books. Tesco want to fill their shelves with names and faces that the general public recognise and so that’s what the publishers give them.

A good thing for literature in Britain? I don’t think so. But I digress.

The thing about Tesco is that, unlike the other ‘big’ (comparatively small) supermarkets, you see just about all sorts of people in the stores, regardless of ‘social class’ or income.

There are five other ‘major’ supermarkets in Britain. Sainsbury’s, Asda (owned by Wal-Mart, the worlds largest retail – but number two in Britain), Morrisons, Waitrose (a part of the John Lewis partnership) and Somerfield. Then you have the ‘low cost’ retailers from the continental Europe like Aldi, Lidl and Netto.

Now, each of these other supermarkets have very clear images and a very distinct type of person who shops there. Waitrose, for example, holds a Royal Warrant as the ‘Queen’s Food Supplier’, although I doubt very much that Liz ever actually pops down there to get the meat and two veg. But the type of people who shop in Waitrose tend to be of a higher ‘social class’ and don’t mind paying the extra five pence per tin of Heinz Beanz. I’m trying to pick my words carefully here so as not to offend anyone, but you know what I mean. Sainsbury’s would also tend to attract those of higher than average earnings.

Conversely, the customers of Asda and Morrison’s, who market themselves as ‘costing less’, would have a much lower household income, if you take my meaning.

And yet, in Tesco, you’ll see all of these types of people. Prime example, last night I had to ‘pop in’ to Tesco, which is on my route home, to get some bread, ham and bottled water. Somehow I managed to come out having spent nearly £25, but we won’t go into that. What I found when I got the the till was a very well-dressed, nicely made-up middle-aged woman in front of me and a family behind me that consisted of a father with short, bleached spiky hair and a vest that showed off his thick arms and tattoos, a young boy who looked like he hadn’t washed in a week and a mother who was… How can I put this? You know how some women look really, really good when they are pregnant? They look elegant and have a ‘glow’ about them. While pregnancy just makes some other women look even more trashy than they did to start with? She was one of the second type.

I couldn’t quite believe the contrast in the people either side of me in the queue. And this is where Tesco’s power lies. They attract all sorts. and then all sorts keep going back. It is, frankly, the best business strategy of the last twenty years. and they just keep getting bigger and bigger.

So, maybe, one day I won’t be writing for the Britwriters blog or attending the BritLit convention. Maybe I’ll be writing for the Tescwriters blog and attending TescLit 2025. Who knows? I don’t , but I sure hope it doesn't happen. And I hope the government can find a more suitable buyer for Northern Rock. But given it appears that Gordon Brown wants to get shot of the bank before next year’s election, somehow, I think TescBank will be the next big name in the mortgage market.

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