Retailers mistaken lament
THE pace of change on the High Street is startling. Amazon has been looking for an entrance into the British grocery market for some time. Now it has it through an alliance with Morrisons.
The Bradford-based group may be the weakest of Britain’s big four supermarkets, but through its deals with Ocado and Amazon it has taken a leap forward which will give shareholders new hope after some sterile years.
Amazon has shown an ability to disrupt traditional markets and make them its own through superior logistics and robotics.
David Potts, one of the Tesco refugees now at Morrisons, is throwing down the gauntlet to rivals.
An often forgotten advantage that Morrisons has over the other supermarkets is vertical integration. It has its own food production operation from farm to abattoir to the butchery counter, and now the ability to leverage this online into fresh and frozen food deliveries.
Amazon’s march into grocery territory makes it all the more important for Sainsbury’s to come back with a more seductive offer for Home Retail Group that leaps over the South African challenger Steinhoff and extends its reach in non-food and fast delivery. Sainsbury’s has the ability to pay more because of the cost savings it can make by ending Argos’s older leases and through the integration of its credit book and Sainsbury’s Bank.
In the present frenetic environment Sainsbury’s chairman David Tyler and chief executive Mike Coupe need to demonstrate boldness.
There is very little of that to be seen in the self-serving British Retail Consortium report on the future of jobs in retail. It advocates reform of business rates. But does not tell the Chancellor George Osborne where he is going to find the foregone income at a time when the Treasury is searching for further deficit reduction if it is to meet the Government’s fiscal target by the end of the year.
Moreover, for senior executives of major retailers to wax on about the damage likely to be done by the National Living Wage, when none of them show any sign of moderating their own wage packets, is morally suspect.
In the South, where the cost of living is higher anyway and wages rates higher too, the living wage should not be an undue burden.
As you move further North it is more of a zero sum game than the retailers would have you believe.
Every penny extra in the pay packets of shop workers is more disposable income for them to spend.
It is only the ‘Mom & Pop’ operations which will seriously suffer and there ought to be ways to ease their path to a fairer wage structure.
It is traditional for special interest groups to plead poverty ahead of the Budget and some of the recent changes affecting high streets, such as the way in which the apprentice levy is to be recycled back into business, could do with adjustment.
The new structure makes it less likely that companies that operate their own internal training will bother with apprenticeships.
If they do so they will become bogged down in bureaucratic nightmares, including Ofsted testing of their own schemes.
The BRC is a useful collator of data about the High Street. But its special political pleading does it little credit.
Deal breakers
THE efforts by the bigwigs behind the would be ‘merger’ of the London Stock Exchange by Deutsche Boerse to pretend this is a done deal must be disregarded.
Firstly, as everyone needs to recognise, there is no such thing as merger of equals when one of the equals, the Frankfurt exchange has 54pc of the stock.
Secondly, the competition barriers to the deal are becoming higher. The French economic minister Emmanuel Macron is concerned about the threat of the deal to Paris as a financial centre. Pity that George Osborne or the remarkably silent Business Secretary Sajid Javid isn’t taking the same interest in the impact on the City.
Remarkably the UK may have to depend on the European Competition Commissioner, the formidable Margrethe Vestager, to launch an inquiry and rid them of a troublesome interloper.
Size is less important than flexibility when it comes to financial markets. That is why both the LSE and DB have opted for advice from boutique advisers rather than the investment banking dinosaurs.
Out of Africa
GREAT to know that when it comes to making sure that investors funds are spent wisely, EasyJet founder Sir Stelios Haji-Ioannou has lost none of his fervour.
As a 12pc investor in African nofrills carrier Fastjet Haji-Ioannau rightly is concerned that soon-to-depart chief executive Ed Winter and fellow directors are sitting in Gatwick depleting the group’s financial resources while reporting revenues in Tanzanian currency 4,750 miles away.
Perhaps Fastjet could lease some African premises from Barclays, which reportedly is heading in the opposite direction.