Thursday 18 April 2013

Why Tesco is sinking

I wrote a book a decade or so ago called Authenticity which made me pretty sceptical about the whole idea of 'brands'.  Despite the rhetoric from marketing gurus, most people hate the brands they use and are endlessly frustrated and disappointed by them - yes, I know, there are exceptions.  The aggressive apotheosis of branding as the key to success really is a lot of old twaddle.

So when a friend of mine alerted me to their new local Tesco, which is doing all it can to hide the fact that it is a Tesco at all, I suddenly got interested.  The news today that Tesco's performance was its worst ever, and that they are pulling out of the USA, rather confirms it - and if they are trying to keep the brand secret, Tesco executives themselves must be slightly aware of its toxic elements.

This appears to be the case with the Tesco chain of One Stop convenience stores.  My friend asked why it didn't say 'Tesco' on the outside of their new One Stop in Solihull and was told by the sales assistant that it was now policy because they didn't want to put customers off.

It is worth asking for a second why this might be.  Is it that people are reacting against the overwhelming technocratic feel of Tesco, the sense of the security guard eyeing you up as you struggle with the robots at check-out?  Or is it that people have now grasped the truth - that chain stores tend to suck spending power out of local economies, and tend to make people poorer as a result?

Is it even that people sense the huge privileges that Tesco's size give it - the right not to pay bills for 90 days when smaller competitors have to pay in 30 (providing them with the interest-free loan equal to two months stock)?

I know it is also that Tesco prefers not to allow comparisons between its Tesco Express stores and its One Stop stores, which are in poorer areas and charge up to 14 per cent more than in some other places (as always, the poor pay more).

A bit of all of them perhaps.  Somehow this is even more significant than the news that their American chain Fresh & Easy is up for sale.  When a shopping chain feels it necessary to pretend they are somebody else, then the writing is on the wall.

The real issue is this.  What kind of entrepreneurial activity is most likely to bring local recovery and local resilience?  The answer is probably not a chain store that competes in every market - the very opposite of an anchor store.  It is going to be the revival of a genuinely local entrepreneurial culture.

What holds this up?  The failure of political debate to distinguish properly between being pro-big business and pro-small-business.  What we really need is to be able to articulate a political approach that allows the small to fight back effectively against the big, and stop pretending that pro-big business policy is somehow automatically supportive of small business, when the reverse is the case.

When the biggest of the big starts pretending it is a different brand altogether, then maybe something is shifting.  Or am I being hopelessly optimistic?


pablopatito said...

I think it's because Tesco isn't a great brand. People only shop there because it's relatively cheap, or because they have no choice.

You couldn't say the same about, say Waitrose, which has a great brand, despite enjoying all the privileges of scale that Tesco does.

Isn't it the difference between "premium" brands (Apple, Waitrose, Gap, Richer Sounds) and ordinary brands (Tesco, Argos, HMV)?

Gordon said...

It's about time that price flexing - charging more in some stores than others - was banned. Apart from using it to gouge poorer customers Tesco is on record (documented a few years ago by the All Party Parliamentary Small Shops Group) for cutting prices until they have driven local independents out of business.

Without price flexing it would be much harder, probably impossible, to compete in all markets and niches and that could only be a good think - although I don't expect Tesco apologists to agree!

Nick said...

I have been involved in a few branding exercises. I often ask people who they LOVE and HATE when it comes to brands. No-one ever struggles to get incensed about hateful big brands that have let them down, lied to them and otherwise behaved badly. In fact sometimes I need to restrain them...Tesco's name does come up quite often...

Bill said...

Tesco expanded in the first place because they were cheaper than the competitors. Now they are beginning to collapse on themselves like all great empires.