Leading article: There is no reason to fear the success of a retailer

Click to follow
The Independent Online

It is an astonishing story. A business that began life on an east London market stall in the chaotic aftermath of the First World War is expected to announce record profits today of more than £2bn. Tesco has come a long way in the past nine decades. It now enjoys a seemingly unbreakable grip on the UK grocery market. Having won the battle of the out-of-town supermarkets, it is invading high streets with its smaller "Metro" outlets. Tesco has also long since moved beyond groceries. It sells everything from clothes to DVDs to life insurance. Such is its dominance in the retail sector that one in every eight pounds spent by British shoppers ends up in a Tesco till.

All the auguries point to further expansion. Tesco has announced its intention to exploit its vast property portfolio more fully. The company is also well placed to continue its expansion overseas. New stores are planned for Korea, Thailand and even the United States. This relentless activity and apparently unstoppable success has resulted in a new buzzword: "Tescoisation".

There are, however, concerns about the company's methods. The motto of Jack Cohen, Tesco's founder, was "pile 'em high, sell 'em cheap". But today, Tesco stands accused of selling items not just cheaply but at a loss to attract a heavy volume of customers. Smaller retailers, that lack the capacity to do this, complain that they are unfairly driven out of business. Tesco is also accused of abusing its dominant market position in its dealings with British farmers. The company claims it offers a fair deal, but farmers often have nowhere elseto sell their produce. Tesco's environmental record is also poor. Its out-of-town stores encourage people to drive long distances to buy their groceries. And it has a record of flying in food that could be sourced locally. The company's expected announcement of a green investment programme is too little, too late.

But we should beware assuming that if Tesco did not exist all would be rosy. All supermarket groups indulge in such harmful practices. Tesco just happens to be the most successful - and so attracts the most flak. Tesco is also, arguably, preferable to other retail groups. It treats its employees better than the US supermarket giant Wal-Mart. We should also note that it is largely thanks to Tesco's dominance that Wal-Mart, under the Asda brand, is struggling to make inroads here. This is not to excuse Tesco's behaviour, but to put it in context.

We must also be wary of assuming Tesco always has everything its own way. Local councils are beginning to turn down planning applications for Metro stores. MPs and competition authorities are taking a closer look at its practices too. There are also barriers to Tesco's growth abroad. Even anonymous supermarket chains have national characteristics. Compare, for instance, the hypermarkets of France with the enormous Wal-Marts in the southern states of America. Tesco failed to establish a presence in Taiwan. Its strategy is by no means guaranteed to result in success outside Britain.

Moreover, the history of capitalism shows that no company remains on top forever. Once Marks & Spencer was in a similar position to Tesco. It was untouchable at home and expanding rapidly abroad. But the fall, when it came, was precipitous. There is no reason this could not happen to Tesco, too. There are signs that Tesco's competitors - Sainsbury's and Marks & Spencer - are picking up market share. The beginning of the end of Tesco's dominance may have already begun.

No one could plausibly argue that Tesco's influence is wholly benign. But neither is it wholly bad. Its efficiency helps to create jobs and keep down prices. While not ceasing to demand that Tesco - and all supermarkets - reform their practices, we can also take some pride in the success of a world-class British business.