Over at The Futures Company blog I have a short post on Tesco’s problems, prompted by the abrupt dismissal of its Chief Executive Philip Clarke in the face of the continuing pressure on the company’s market share and profitability.
For non-British readers,Tesco is (still) Britain’s largest supermarket, but having been utterly dominant in the 1990s, has been struggling for much of the past decade.
The first thing I said in the post was that the food market had become more complex since the financial crisis, and Tesco hadn’t been able to follow. This normally translates into a story about being “assailed by discounters”, but the discount proposition isn’t just about price. People who advise Tesco to turn its attention to fighting with discounters on price show they don’t really understand how the market has changed.
In the first part of this post, I looked at the impact of the economy, and its business history, on HMV’s collapse. In this second part, I’m going to turn my attention to changes in the music market, the impact of the internet (there’s two stories here, not one), and the business’ strategic reponse.
The received wisdom about the collapse of the British entertainment chain HMV and its acquisition by the distress specialists Hilco is that it didn’t see the internet coming. And doh! Actually, the truth has a lot more to do with economics and the way finance dominates business. This long post is broken into two parts: part 2 is here.
The immediate cause of HMV’s collapse, of course, was the British recession, which has gone on longer than anyone expected, and the economy is now teetering on the edge of an unprecedented triple dip recession. Here’s the NIESR chart showing comparative GDP since the pre-recession peak for the past six recessions. The black line at the bottom is the current recession, and yes, this chart should be on the wall of every economic policymaker in the UK.
A few years ago Citigroup (yes, it’s a bank) came up with the notion of ‘plutonomy‘ to describe the way the economy was going. It was a neologism, of course, but one that needed little or no explanation.
But even three years after the financial crash, we’re still seeing that ethos and that economy on our streets and in our public realm.
There’s another kerfuffle about getting rid of plastic bags, since one of the government’s waste advisers has suggested that government plans to ban plastic bags, or charge for them, are a diversion from more pressing environmental issues. While it is true that plastic bags represent only a small amount of waste, or of oil use, the reason reducing their use has become important is because they are symbolic of a different issue – respect for other species.
Mobile payments have at last reached the stage in the UK where trials and pilots are starting. Barclays Bank, O2, and Transport for London has announced a trial of a combined transport/payments card in London (news report here), while RBS and MasterCard have announced a trial of a mobile debit card in London and Edinburgh (D). But as Dave Birch points out in a long and wry post at the Digital Money Forum, just because some producers are getting excited about a product doesn’t mean that it will be successful; the payments market place is slow and conservative.
The news that the UK Competition Competition has broadly – I’m paraphrasing – found, at least provisionally, that everything is pretty much OK in the world of Britain’s supermarkets reminds me of the trouble with competition economists: they know the price of everything and the value of nothing.
What happens if the pervasive chemicals in the everyday products we buy and use are the reason that we generally feel below par so much of the time? It could cause a backlash by consumers who increasingly regard their well-being as important to them. The thought comes both because of the wave of stories about product recalls from Chinese factories, and the recent House of Lords Select Committee report which said that allergies were reaching “epidemic proportions” – without their experts seeming to have much consensus as to why.