The Trolley War between Tesco and Walmart
The world market store war entered a new phase when Walmart entered the UK market.
The World Market Store War - Battle of Britain
"One pound in every eight spent in a British shop goes through a Tesco till."1 But it's not the only powerful supermarket chain in Britain. The growth of Britain's supermarkets is a great success story, which has had much written about it over the years. A good, recent book is Judi Bevan's "Trolley Wars"2. This concentrates on the charismatic, autocratic figures who created modern British retailing. They include Jack Cohen, Ian MacLaurin and Terry Leahy (of Tesco), Ken Morrison and the Sainsbury dynasty.
Tesco are winning the war in the UK, but the other supermarkets are fighting tough, rearguard actions. Tesco has size on its side. They have around two thousand stores, compared to Sainsbury's six hundred. Tesco took a strategic decision to acquire out-of-town sites, which has left other chains finding it difficult to find suitable locations.
Judi Bevan gives a good account of the deals done to produce the present large chains, explaining how Walmart swallowed Asda and Morrison swallowed Safeway. But, in the UK, they are still smaller than Tesco. Part of this move to gigantism is to sell everything. Caroline Foulkes gives a good account of an encounter with a mega-store, "While on a recent trip to Newcastle, I happened to visit the Tesco Extra store at Kingston Park. It is jawdroppingly vast. It has everything (well, ok, almost everything) you could ever need. And it's cheap. You'll never shop anywhere else again."3
Tesco was the first UK supermarket to extend its range beyond food, in the early Seventies, through an initiative of Leslie Porter's that introduced tea towels and other simple textile products. They sold like hot cakes. Asda also introduced non-food stock within a few years. Another amazingly profitable scheme introduced by Tesco was the Tesco Clubcard loyalty scheme. This was introduced in 1995 by chief executive Terry Leahy, after remembering the "divis" his mum used to get at the Co-op. More than 10 million people are subscribers. Again, the other supermarkets followed in Tesco's wake.
Tesco have followed Walmart's model in the US by trying to own everything. Dixons' move out of the high street is partly down to Tesco's decision to stock electrical goods. Smaller companies, i.e. most other companies, cannot match Tesco's throughput. And throughput determines price. More endangered are places like WH Smiths and Boots. Tesco have noticed how, in America, Walmart have saturated the market and destroyed stores like WH Smiths and Boots. Now Tesco is moving in the same direction, and Asda are joining them.
Even book shops are threatened by the price wars introduced by Tesco. To compete, shops like Ottakers, Borders and Waterstones have become more like supermarkets. They stock only fast selling items, and skimp on staff training.
War in Korea and Africa
While Walmart is engaging in battle with Tesco in the UK, Tesco is opening up other fronts. It is entering many foreign markets, and its approach to entering the Korean market provides an instructive example.
Spotting that the distribution market in Korea was under exploited, Tesco
joined with a company with a great local reputation to launch Samsung Tesco Home
plus. It drove expansion to get thriving business in many of Seoul's satellite
cities, including Suwon and Ansan. Homeplus is now a familiar shopping
experience for many housewives in cities like Pusan and Taegu. It has much more
recognition that any offering from Walmart, or its main French Carrefour.
Since its launching of the business in May, 1999, Samsung Tesco has shown a
flexibility and single-minded approach to expansion that its rivals could not
match. One wonders if the highly competitive UK supermarket environment has
given Tesco a hunger and dedication that the near-monopolies of Walmart and
Carrefour cannot match?
Of course, the war between the supermarket giants can have a massive negative impact on suppliers, especially in third world countries. Because they control the market, they drive the wages of the poorest people in Africa down to less than $1 a day. But, "if these rural Africans were to put all that they get each day, free, from their farms, rivers, forests, etc, in one basket and put that basket on the shelves of Tesco in London or Walmart in New York, the contents of that single basket would cost more than £200 a day."5
If the managers of Tesco and Asda are the shock troops in the supermarket wars, small farmers are civilians caught up in the war zones. And in war it is always the civilians that suffer most.
Conclusion
In many areas the UK has had to sit back and "eat dust" in competition with the US. In areas like space and computer technology the US has been totally dominant over the last half century. But Walmart are perhaps starting to recognise that the English, as Napoleon said, are "a nation of shopkeepers". The continuing growth and success of Tesco shows that, in this area, they are at least matching, and in many areas bettering, their giant US rival.
[1] "Supermarkets and the British Way of Life", Albert Hobson, . Contemporary Review Nov. 2005/p>
[2] Trolley Wars: The Battle of the Supermarkets, Judi Bevan. Profile Books. £17.99. xiv + 258 pages. ISBN 1-86197-661-5.
[3] "Store Wars; They Started with Food. Now Britain's Big Three Supermarkets, Asda, Tesco and Sainsbury's Can Provide You with Everything", Caroline Foulkes, The Birmingham Post (England) 5 Oct. 2005
[4] "Samsung Tesco's Homeplus Thriving under 'Value-Store' Concept," Korea Times (Seoul, Korea) 9 Jan. 2001
[5] "The Myth of Living on a Dollar a Day," Regina Jere-Malanda, New African Jan. 2006