Grocers in a game of catch-up
IT has become very fashionable to denigrate the legacy of Sir Terry Leahy at Tesco. The former chief executive did get some things horribly wrong, including the Fresh & Easy experiment in the United States and building too many edge-of-town Tesco extra stores.
Nevertheless, it is a tribute to his retailing insight that he spotted the trend to convenience stores and the potential of a return to the High Street almost a decade before his competitors.
Leahy’s swoop on Alldays and the T&S group in 2002 gave it a head start over competitors.
Impressively, Tesco has 1,672 Express – smaller stores – as well as 195 larger town and suburb Metro shops. Admittedly, some of this portfolio – including the more upmarket Europa chain Leahy bought in London – may look a little shabbier than some of its rivals.
Hence the promise of a facelift by Leahy’s hopeless successor Phil Clarke. But it is a legacy that gives Dave Lewis, the current boss, a real opportunity. What has subse- quently emerged is a race for space among the competitors. Mike Coupe of Sainsbury’s noted this week that its chain of convenience stores (there are 600) is the fastest growing part of the business with sales leaping by 17pc over the last six months. It is pressing ahead with 100 store openings a year.
It is not alone. All the supermarkets are engaged in a flight back to the city.
Morrisons is investing heavily. So are upmarket Waitrose and Marks & Spencer through the latter’s Simply Foods format.
The models are slightly different. M&S is interested in medium-sized stores on suburban high streets with some limited parking.
Now, as Property Week reports today, Aldi and Lidl are launching their own blitzkrieg. Aldi is searching for two kinds of ‘city’ store across London: smaller shops, of around 6,000 square feet, and larger shops of up to 14,000 square feet, mirroring the Tesco size range.
Lidl is rolling out its own town centre brand starting with a former Co-op store in Kentish Town. Asda also has instructed agents to look for High Street sites.
Tesco, which acquired most of its neighbourhood stores on the cheap some years ago, should be in a better place than its rivals, who have to scramble for premises, bid up prices and put in new distribution systems.
The set up and logistics costs, together with price competition, will mean thinner margins.
Over time, however, the real victims of the expansion drive could be the independent corner shops that have proved such a useful launching pad for entrepreneurs f rom the sub- Continent and beyond.
Culture wars
MARK Carney’s letter to G20 leaders in Brisbane reads a little like a valedictory. The Bank of England’s governor, who is also chairman of the Financial Stability Board set up in the aftermath of the financial crisis, declares that ‘measures to fix the fault lines that caused the crisis are now substantially complete’.
Maybe, but anyone watching events in global banking over the last couple of weeks will recognise much still has to change.
Europe’s banks are stuck at the starting gate in implementing reforms and it is not clear who is in charge: the European Central Bank or the national authorities. Recent asset quality and stress tests were far from convincing.
Moreover, understanding and taming the shadow banking sector, particularly in China, is a task so big it doesn’t bear thinking about.
As significantly, the forex settlements with six big banks were a sharp reminder that in the postcrisis era, large institutions were still cheating their customers right up until 2013. Carney’s assertion that the banks must ‘play a role and improve their own culture, trust and ethics governance’ is selfevidently true. A new generation of bankers has taken the helm at the UK banks. But not at JP Morgan Chase, where Jamie Dimon still rules like a demigod despite the payment of tens of billions of dollars of fines. So far leaders in the boardrooms of UK lenders have been ineffectual in taming the animal spirits not just among the traders but the retail bankers too. The delivery of a better culture needs to cascade down from the top.
Co-op’s hero
THE choice of Sir Christopher Kelly as the senior non-executive director of the Co-operative Group looks a smart move. Kelly has a scrupulous record in public life and was the Co- op’s choice to probe the calamitous events at its Bank.
Unfortunately such gamekeeper turned poacher choices have an unhappy history as the short reign of former FSA boss Sir Hector Sants as ethics czar at Barclays demonstrates.
Kelly ought to be tough enough to keep the old guard at the Co-op group from reasserting itself.
But whether he has the kind of commercial acumen in retail and funeral homes needed as the Co-op struggles to restore its finances is a moot point.