As David Cameron sat down on Wednesday morning to make the finishing touches to his speech to the Tory conference, he could have done worse than take a look at that day’s statements from Tesco, Mothercare, SuperGroup and Sainsbury’s.
As David Cameron sat down on Wednesday morning to make the finishing touches to his speech to the Tory conference, he could have done worse than take a look at that day’s statements from Tesco, Mothercare, Supergroup and Sainsbury’s.
With any luck they may have steered him away from his widely trailed plans to exhort UK shoppers to pay off their credit cards right away, although at the time of going to press we didn’t know.
Some of the issues facing the first three retailers named above are self-inflicted. But they are also feeling the pressure of a collapse in consumer confidence that is getting worse, not better. At a dinner we hosted for the chief executives of major retailers on Monday evening, not one of those in the room could find any grounds for optimism ahead of the Olympics.
Retail can lead this country to recovery. But only if customers are given the confidence to spend. No one wants a return to the crazy credit-fuelled boom that prompted the recession. But a country of consumers scared witless to open their purses helps no one.
The Prime Minister needs to listen to retailers. If he does, retail spending will help him out of a hole.
It’s a good job Philip Clarke has come up through the school of hard knocks. In his first six months running Tesco he’s copped more flak than Sir Terry Leahy faced in 14 years and this week he made clear Tesco’s issues in the UK aren’t about to disappear immediately.
It’s easy to let Tesco’s problems in the UK overshadow what were in fact a respectable set of first-half results, with international success mitigating the UK’s problems. The grocer’s confidence in the US breaking even seems well-founded.
But in the UK it’s boxed into a corner. Its market share is so big it can only really go one way. The non-food market has evaporated. And while Tesco set the bar in UK grocery over the past decade its rivals have caught up and are now setting the pace. It’s Big Price Drop is a start, but service and standards need attention too, while halving Clubcard points will alienate some shoppers.
But if there’s one thing its rivals know, however, a wounded Tesco is a dangerous animal. Expect the Big Price Drop to be just the start as it comes back fighting.