It’s good news that Tesco profits are falling
I believe Tesco slowing down is good for the high street, for competition and for consumers.
News broke today that Tesco profits have fallen for the first time in almost 20 years.
A slump has been on the cards ever since January, when the mega retailer issued its first profit warning in two decades, following a particularly shaky Christmas.
The company has been working to win back customers for the last six months, investing an impressive £1 billion back into its stores and brands. However, it takes time to turn around a beast as big as Tesco and it remains to be seen if it can recapture its previous success.
But I don’t want it to. I think it’s good news that the mega-brand’s profits have fallen.
I think that its unbridled growth was bad for the high street, bad for competition and so bad for the consumer.
That’s not to say I want it to fail. Tesco employs 366,000 people globally. I’d hate to see it forced to lay off staff or cut hours – in some areas of the UK it is one of the main employers. In the last six years, its job guarantee scheme has helped more than 2,000 long-term unemployed and disadvantaged people back into work.
However, I think that its unbridled growth was bad for the high street, bad for competition and so bad for the consumer.
Look at how many industries Tesco has entered. It sells groceries, clothing, makeup, computers and gaming equipment. It sells furniture, books, DVDs and jewellery. It offers bank accounts, credit cards, loans, and insurance.
It’s also expanded into 13 different countries and serves around 30 million customers every single week. That’s one hell of a big business.
I do think that falling profits suggest the consumer hasn’t quite rolled over and accepted that Tesco reigns supreme
My local Tesco superstore was recently refurbished. It now contains a beauty parlour, a pharmacist and a photograph lab. That’s on top of the Timpson kiosk in the car park, offering shoe repairs, key cutting and dry-cleaning.
That’s an awful lot of smaller, independent shops in my town centre that will suddenly struggle to compete for shoppers’ business.
Now I’m not trapped in an idealistic vision of the past, I understand that the high street is changing. I don’t believe you can hold Tesco responsible for the changing way that people shop and the abandonment of the high street.
But I do think that falling profits suggest the consumer hasn’t quite rolled over and accepted that Tesco reigns supreme.
There’s still space for other retailers to challenge the behemoth, whether they are small independents or other supermarkets. That kind of retail fight-back can only be good for consumers.
- Felicity Hannah is a personal finance journalist living in the north of England.
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