Impossible to compete

A lot has been said recently on the subject of Tesco but I feel certain points haven’t been aired properly, if at all. These views are purely my own; indeed I have never attended a Lerwick Town Centre Association meeting in my life. I also firmly believe in freedom of choice and that people should be able to shop wherever they want. However …

Firstly, Tesco itself. The original application to build an extension was accompanied by a Retail Impact Assessment (RIA) which stated that “the increase in sales floorspace will be for the sale of convenience goods only”. Essentially this, as I understand it, means food and basic groceries.

The application was approved on this basis. When it became apparent (through Tesco’s own publicity) that the development was not going to reflect Tesco’s original submission the planning service queried this and was told that the RIA reflected its (Tesco’s) “commercial aspirations” at that time (July/August 2008) but that these aspirations had evolved to meet customers’ demands.

Tesco also informed the planning service that the limit of 185 square metres floor space for non-food retail use only applied to the original store and not to the extension. This came as a bit of a shock to the planning service but after taking legal advice it had to admit that Tesco was correct in this instance.

So Tesco hasn’t done anything illegal but wouldn’t it have been a bit less, oh I don’t know, let’s say sneaky, to have informed the planning service of the newfound aspirations and offer to undertake a new RIA since it was in the process of rendering the original one meaningless?

Secondly, the planning board/service. It approved Tesco’s application without ensuring that the limited amount of space given to non-food retail applied to the extension as well as the original buliding. It also let the application proceed purely on the “understanding ” that only convenience goods as described in the RIA would be sold in the extension.

To simply let a development this big proceed on the basis of assumptions rather than signed and binding undertakings is frankly risible, and displays a staggering degree of negilgence, complacency and incompetence.

In addition they (our elected representatives and their officials) have failed to protect their own Local Plan which I believe states, among other things, that it will seek to ensure that “the viability and vitality of Lerwick town centre is protected and enhanced”. Cue hollow laughter.

Our first four Saturdays since Tesco’s extension was open for trade have seen declines in sales of 54, 40, 49 and 37 per cent compared to the equivalent days last year. I’m not claiming that’s entirely down to Tesco but a fair percentage of it must be. Unfortunately the people who have messed up so badly are unlikely to suffer a similar drop in income. In fact I imagine the most we can expect is the usual guff to the effect that “lessons have been learned”. Cue more hollow laughter.

Thirdly, Lerwick retailers have been widely vilified as fat-cat protectionists for opposing this development. Leaving aside the fact that retail associations the length and breadth of the country have lodged similar protests in recent times (check the Tescopoly website) there is a simple economic point here that I can scarcely believe I feel the need to make.

The main reason goods are more expensive in small local shops is not that they are greedy (though some may be) or that they secretly enjoy the abuse, but because they have to pay more for their stock in the first place. Suppliers naturally offer bigger discounts to larger customers who buy greater quantities from them.

Nothing wrong with that, it’s how business works. However, when a company is as big as Tesco it is able to more or less dictate prices to suppliers who simply can’t risk losing that amount of business.

As an example of this we are currently selling NOW 76 at £13.99 while Tesco, I believe, has been selling it at £12.85. If Tesco is paying the same as us for it the company will be making about 35p (less than three per cent) from each copy. I suspect it is paying less.

Even more infuriatingly Tesco regularly advertises new release DVDs for less than we pay for them. In fact we’ve been known to buy DVDs from them simply because they were the cheapest source available. When retailers are cheaper than wholesalers how can anyone compete?

There was a story in the trade a few years ago that Tesco sold 80,000 copies of the second or third Harry Potter movie for a total profit of £1,000 (just over 1p per unit). Woolies sold 30,000 copies of the same film for a profit of £80,000, then went bust a few years later mainly due to being undercut by the supermarkets and online retailers. Zaavi/Virgin went the same way.

Hardly greedy small town rip-off merchants but still unable to compete in a rapidly changing retail environment. I like my job but what to do? Maybe Paul Clelland would let me advertise in Tesco. “Why buy here when you can pay more at Clive’s?” Catchy, don’t you think?

Clive Munro
Clive’s Record Shop
Commercial Street,
Lerwick.