Forest of Dean & Wye Valley

THE RISE AND FALL OF TESCO

In A.Graham on March 5, 2015 at 9:11 pm

How the mighty appear to have fallen! A few years ago, the supermarket giant, Tesco, seemed unassailable.  Through tactics which many considered somewhat dodgy, it had bulldozed its way to the top of the retailing tree. It had expanded its business empire across the world. In the UK it created retail deserts in its wake, as small shop keepers were forced to close down because they simply couldn’t compete.

SATURATION:

Tesco’s tactics were varied. One was to saturate a particular area with stores, to try to block any competitors from moving in on what it had earmarked as its territory.

Another was to build up a “land bank”. Here potential development land was bought up, and then allowed to remain unused until such a time as the company deemed it appropriate to build on it. This, too, had the effect of preventing rivals from gaining a foothold.  Other supermarket giants soon followed, buying up “development” land and leaving it to lie fallow.

And, like some of its more aggressive competitors, it has also been accused of squeezing its suppliers to the point where some were forced out of business.

TESCO IN THE FOREST:

Tesco’s attempted invasion of the Dean began with the new millennium, with plans for new stores in Lydney and Cinderford. The supermarket in Lydney went ahead (involving the demolition of a whole swathe of the High Street) but plans for a new Tesco in Cinderford – right next door to the Co-op supermarket were fiercely contested. Finally, Tesco was forced to abandon its plans for Cinderford  (though in later years, Asda has attempted to build in town).

But then Tesco signed a deal with a local developer to build a new store in Coleford – slap bang next to that town’s Co-op store. A local campaign to stop Tesco was mounted, but work on preparing the site went ahead – until abruptly at the end of last year, the company announced it was abandoning its plans for a superstore in the centre of Coleford.

PROBLEMS, PROBLEMS:

No specific reasons were given at the time, but very soon it emerged that Tesco was in trouble.  It seemed that its end of the year accounts were based on what might be termed “creative accountancy” (see our last issue of the Clarion), when in fact Tesco’s profits had seemingly evaporated. The company is now facing criminal investigation.  Even Terry Leahy (former boss of the retail empire) accused Tesco of taking “its finger off the pulse of the customer.”

tescopolyRETREAT?

Since then, Tesco’s top management has been forced into a humiliating retreat. It has announced the abrupt abandonment of new store development, plus the closure of over 40 stores that are deemed to be unprofitable. Its overseas investment has also been trimmed.  Even before this crisis it had pulled out of its loss-making venture in the USA. Now, it seems, it is to dispose of its stores in Hungary.

For those affected by Tesco’s withdrawal in the UK, it hasn’t necessarily been good news. Shopkeepers forced to sell out or close down in the face of the Tesco juggernaut have been left high and dry – and whole swathes of urban land have been abandoned, as new store development has been shelved, or left derelict.

Tesco’s strategy of retrenchment may be considered necessary in the short term, to aid re-capitalisation of the business – but it may leave it more exposed to others in a highly competitive retail business.  Asda is always hungry for a larger share of business – and there’s always the new kids on the block, Aldi and Lidl, who are eager to expand their store portfolio. Tesco may well have to watch its back.

ALISTAIR GRAHAM

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