It is no secret that retail has been one of the hardest hit sectors during the economic downturn. Huge traditional brand names including Woolworths have bitten the dust and more recently Peacocks has gone into administration, and unquestionably the advent of the internet and on-line shopping has had as big an impact on this industry as any other.
But throughout all the doom, gloom and despondency, there has been a beacon that has continued to brightly shine, take on the global challenges, and continue to dominate the retail market. Until now that is. Tesco, which has become synonymous with the word success, experienced a surprise 2.3% drop in its sales over Christmas – and it sent a shockwave across the whole group, leading to an incredible £5 billion being wiped off its share price. This may not have been as big a disaster had competitors suffered too. But peers, including Sainsbury’s and Asda reported much improved figures. On-line grocery seller Ocado saw its sales soar by over 20%. So, after years of growth, why have Tesco been hit in this way. Many will suggest that they have become a victim of their own success, and there is some truth in this. As well as becoming synonymous with the word success, Tesco has also become synonymous with ‘monopoly’ ‘bully’ and ‘greed’. One councillor in Liverpool described Tesco as ‘the evil empire’ when the retailer was attempting to open a store in a part of the city centre two years ago. The Tesco brand has even been attached to pieces of legislation passing through the commons. Changes to the way in which legal services can be delivered in the future have been nicknamed ‘Tesco Law’, even though, up to this point, Tesco have shown no interest in getting involved in establishing a legal arm. And we are all aware of the phrase ‘Tesco Town’s’. Undoubtedly, this has caused reputational damage, which will inevitably hit its bottom line. But we should all remember that through its innovation, detail to customer service and top notch marketing, Tesco raised the bar for all supermarket chains, whilst also creating literally hundreds of thousands of jobs. That this positive contribution to its sector and the wider economy has been lost is a lesson to all businesses. However successful you become, you can never sit on your laurels, and certainly you should beware of others portraying your image for you. As with all businesses, small, medium and large alike, the issue of leadership is a key one. I have to wonder whether the departure of Sir Terry Leahy as Chief Executive around a year ago has been as much, if not more, to blame for Tesco’s current difficulties as the other factors identified. Would he have allowed the negative campaign that has been waged against Tesco continue unabated? Indeed, would he have waited until £5 billion had been wiped of the Tesco share price before introducing the radical changes that we are now told new boss Phillip Clarke is set to introduce in 2012? Somehow, I don’t think so.
