Tesco’s continued difficulties are the result of hubris and the inability to engender affection among core UK consumers.

It’s not often you hear someone say, after a disaster happens, “I could have told you so, but I didn’t.”

In March 2006, I wrote here about the fall of previously invincible-looking retailers that had dominated the industry for ages, namely M&S and Sainsbury’s. I looked at parallels with the history of great nations, and the theory that all great world powers eventually fall because they overreach themselves, become ungainly and slow to respond to change, and thus are vulnerable to newer, more agile nations.

In 2006, just as the US was the only remaining world superpower, so it seemed that Tesco was our only retail one.

Although there was every reason to believe that Tesco would continue to expand and prosper, there were also signs that it might be starting to lose touch with its core UK customers.

But I didn’t have the foresight (or maybe it was the nerve) to predict its downfall from ‘strategic overreach’.

Roll forward eight years and, with the benefit of hindsight, it looks like that is pretty much what has happened.

Right now, everyone is focused on the missing £265m and offering the new chief executive their advice.

There is a sense that Tesco’s problems began a couple of years ago. They did not.

Until very recently, Tesco was aiming to sell us in the UK an astonishing range of products, from groceries to fashion to mobile phones to kitchens to banking, and so on and on; it was also expanding into the four corners of the earth to do the same. What kind of genius would you have to be to succeed in all of that?

Coupled with that was another factor, which may now be the biggest barrier to a recovery at Tesco.

The brand, although widely respected, is not much loved. I found this repeatedly while running Superquinn in Ireland with Tesco as a competitor. When asked, customers would say they chose Tesco because of price, or convenience, or range, or ease of shopping. They never said it was because they loved the brand; in fact most of them disliked Tesco.

I concluded that Tesco was supremely skilled at the ‘hygiene factors’ of good retailing, but it never won the hearts of its customers.

I’ve always believed that retailing is a business as much about the heart as the head.

Any consumer brand works by creating a resonance with customers that is often more emotional than rational. In retailing, this resonance works to spread endorsement among customers, and crucially it makes them more loyal in the face of challenges from competition or elsewhere.

It explains, among other things, why cheap prices or ubiquitous stores will normally only make customers ‘fair-weather friends’ – when things such as price and convenience are no longer seen to be to your advantage, their loyalty falls away readily. This is a real issue for Tesco now.

Perhaps there is a message in Citizen Kane for all retailers: in the end, love is more important than power.

  • Simon Burke, chairman, Bathstore