Simon Evans: If Tesco bullies the little man, it's time to shop elsewhere
Giant's decision to pay later could destroy its suppliers
Sunday 02 November 2008
Friends used to joke that I was always in Tesco when they rang me on my mobile phone. They were right. I used to spend a fortune in there. It was convenient, relatively cheap, with a range of goods on offer that rivals could only dream of.
When Tesco opened a giant new store in my home town near Cardiff, I was delighted, even if the monolithic structure lit up the night sky like something out of Close Encounters.
But last week's decision by Sir Terry Leahy's group forcing suppliers to wait almost two months to be paid – previously it was just one – has foisted a change on my thinking.
I've decided to take my business elsewhere, because, in my humble opinion, Tesco's actions are deliberately provocative and unnecessarily aggressive. It's doing it because it can.
Suppliers, typically small or medium enterprises, are already facing the squeeze from their banks, with overdraft costs exorbitant and loan finance practically non-existent. With cash being king, I certainly don't think it's alarmist to suggest that many of Tesco's suppliers will go to the wall because of its action.
Suppliers have privately complained about Tesco's strong-arm tactics for a while but have shied away from publicly rebuking their biggest customer for fear of being axed.
It's difficult for the man on the street to get his head around the supply decision, given that Tesco pocketed profits of nearly £90 a second in the first half of the year. And it just feels to me that the concentration of power in Sir Terry's hands is too great.
We, the British public, created the Tesco beast by flocking to its stores in huge numbers. Perhaps we now need to tame it by shopping elsewhere.
If Tesco's Knight of the Realm is having a tough time with his PR, spare a thought for Marks & Spencer's Sir Stuart Rose. This week he faces one of the biggest tests of his tenure at the retail group when he delivers the company's half-year numbers. He has, so far, refused to countenance the prospect of slashing its sacred dividend, but weak numbers will heap pressure on him to cave in. The prospect of Sir Stuart having to step aside isn't as fanciful as it once may have been.
Discount retailer Primark will also issue figures in the coming week. Judging by the masses grappling to get into the store last week its numbers are unlikely to be anything but good.
Woolworths doesn't have any figures for the market, but don't bet against another piece of bad news emerging. Last week it was revealed that Burdale, which lent Woolies £300m earlier in the year, had brought in restructuring experts Deloitte to look at ways to inject life into a company that looks odds on to fold in the next few months. How Steve Johnson, the chief executive who started in September, must rue his decision to join.
Talk in the retail arena last week was dominated by the opening of the Westfield mall in White City – destined to be a white elephant if some forecasts are to be believed. Walking past it in the driving snow last Tuesday it looked more building site than Europe's biggest shopping centre.
I'm sure that West Londoners will be piling into the giant Westfield car parks today. The question is whether they'll be spending or just looking.
Sadly, I think it'll be the latter.
MoD's contract bidders fall victim to the law of unintended consequences
Do we trust the Government to play fair? That's the question that must be on the lips of the Lockheed Martin-led consortium vying for the Ministry of Defence's (MoD) £5bn search-and-rescue helicopters contract.
One of the unintended side-effects of Gordon Brown's decision to part-nationalise the banks is that many of the bidders gunning for government contracts are essentially owned by Whitehall. In the £5bn search-and-rescue contract, defence group Thales and helicopter firm CHC have teamed up with Royal Bank of Scotland.
Advisers to the rival consortium have pondered whether the MoD can really not select a group that includes a key part of the Government's own financial arm in RBS.
By the time the 30-year contract starts in 2012, it's quite possible the Government will have sold on what it invests in RBS. And the truth is that a defence industry source says "we just have a bit of a giggle about this", while a member of the rival consortium acknowledges that it shouldn't make a difference to the preferred bidder selection next June.
But that rival does point out how bad the perception could be if the RBS group wins. These banks get involved in so many major government contracts, including health and education, that surely one losing team will complain, formally, of foul play over the next few years.
We only have to look at the "yachtgate" affair to see the importance of perception. The coverage seems to have focused as much on the idea of politically influential people drinking champagne with a Russian oligarch as on what actually happened.
A bad taste has been left, yet so much of the affair seems to have amounted to unproven accusation and counter-accusation.
The Government might well have to beef up its contract selection panels with independent – and probably expensive – advisers, if it is to avoid any accusation of handing contracts to its banking subsidiaries. This is a terrible shame and very probably a waste of money, but it is essential.
Hohn hedges while activists fail to shake up the FTSE100
With one third of FTSE100 firms now trading at a discount to their book value – the stock market values these companies at less than their basic liquidation values – the markets should be ripe for activist investors to shake things up.
But they are not. Activists are having a bad time.
Last Friday, Chris Hohn, pictured above, the feted hedge-fund manager whose intervention sparked the break-up of ABN Amro last year, was forced to bow out of his battle with Japanese company J-Power, at an estimated cost of more than £80m.
Meanwhile Knight Vinke, the Monaco-based hedge fund, still has a large dollop of egg on its face on the back of its horribly mistimed attempt to shake up HSBC, perhaps the best-performing UK bank in the credit-crunch.
As we revealed last month, Glenn Cooper, the activist fund manager responsible for bringing Manchester United to market in the 1990s, who also took on Vodafone's management last year, is looking to raise £500m for a new fund to challenge some of the UK's biggest underperforming stocks.
I hope that Mr Cooper is successful in raising the cash to tackle the FTSE's lumbering giants. Activism is alive and well among smaller companies. It would be nice to see the management of some of the UK's biggest firms having to answer a few awkward questions soon.
South Korea ferry: Vice principal rescued from sinking ship found hanged
Overheard in Waitrose: documenting the chatter in 'Britain's poshest supermarket'
Oscar Pistorius trial: The case against Oscar Pistorius – and why the prosecution claims his story doesn't add up
Peaches Geldof funeral: Private ceremony to be held at same place as her mother Paula Yates on Easter Monday
Shropshire criminals ‘using unmanned drones and infrared cameras to find illegal cannabis farms’ – and then steal from the growers
The food poverty scandal that shames Britain: Nearly 1m people rely on handouts to eat – and benefit reforms may be to blame
US Navy christens huge $3 billion destroyer ship USS Zumwalt that appears as a fishing boat on enemy radar
Scottish independence: It is the English who should be on their knees, begging the Scots to vote ‘No’
Nigel Farage fatigue? Half of voters ‘immune’ to Ukip’s appeal
Nigel Farage on Have I Got News For You: Ukip leader ridiculed over expenses and party 'fruitcakes'
Nigel Farage: I’m taking on the status quo, and the Establishment’s fighting back
- 1 Are you turning into your dad? The top ten signs you've embraced dad-ism revealed as survey says 38 is age men turn into their father
- 2 Overheard in Waitrose: documenting the chatter in 'Britain's poshest supermarket'
- 3 Video of British Muslims dancing to Pharrell Williams's hit Happy attacked as 'sinful'
- 4 24 people applied for the 'world's toughest job', here are their interviews
- 5 Grace Dent on TV: Game of Thrones has jumped the shark
iJobs Money & Business
£150.00 per week: QA Apprenticeships: This company has been providing on site ...
£221.25 per week: QA Apprenticeships: This company is a well established Inter...
£40000 - £50000 per annum: Harrington Starr: Client Relationship Manager - SQL...
£35000 - £50000 per annum: Pro-Recruitment Group: Take your chance to join the...