Wal-Mart CEO Thinks British Should Investigate Tesco
By George Anderson
There’s a new benchmark for determining what constitutes a surreal experience in the retail business.
Lee Scott, CEO and chairman of Wal-Mart, believes it is time the British government looked into Tesco’s business practices to determine if the company is engaging in anti-competitive activity.
Tesco has increased its leading share of the grocery market over the past three months to 30.5 percent based on figures from the market research firm TNS. Wal-Mart’s Asda division has a 16.7 percent share as the second largest grocer in the U.K.
“As you get over 30 percent and higher I am sure there is a point where government is compelled to intervene, particularly in the UK, where you have the planning laws that make it difficult to compete,” Mr. Scott told The Sunday Times.
“At some point the government has to look at it,” he added.
Lucy Neville-Rolfe, corporate and legal affairs director and company secretary at Tesco, said the government has investigated the company. “Previous Competition Commission inquiries have found that the market – and Tesco – operates in the consumer interest. It is a competitive market. The consumer is the winner.”
Tesco has faced challenges reminiscent of Wal-Mart’s experience in the U.S. The chain has been accused of using predatory pricing and promotions to lure shoppers away from other retailers. It has also faced opposition in a number of communities where it has planned to build new stores.
While Wal-Mart’s Scott does want the government to look into Tesco’s practices, he readily acknowledges his competitor has found other avenues to grow business not yet explored by his company’s Asda unit.
“A lot of Tesco’s growth has come from the small convenience chain. Andy (Bond, the chief executive of Asda) and his team have got to look and see where the opportunity
is for us with that kind of space,” said Mr. Scott.
Moderator’s Comment: What is your reaction to Lee Scott’s call for the British government to investigate how Tesco is achieving market share increases
in the U.K.? Why is Tesco as successful as it has been?
The Sunday Times piece said Wal-Mart has a 10 percent share of the retail market in America. While broadly speaking that may be true, the retailer
holds significantly larger share of the total market in specific categories. Should the U.S. government be “compelled to intervene” in product categories or perhaps geographical
area where the company has achieved market share in excess of 30 percent? We think not. –
George Anderson – Moderator
What retailer said “All is fair in love and war”? If WM can get away with harassing a competitor, they shouldn’t try it? Before reading this article, I was not aware that the UK government was taking its marching orders from WM.
There are specific things the government should look into. The deductions area is a cesspool — Saks is far from alone. There is rampant abuse of trade promotion allowances (e.g., Office Max).
But these are issues separate from a magical 30% line.
Tesco has enjoyed fantastic growth, to the detriment of Sainsbury, Waitrose and others. Wal-Mart was stopped by the British government from expanding further through acquisition. While Tesco does use customer information to target products and prices, you have to wonder how then can they continue to gain market share in a very traditional market?
Fair practices must apply equally to all. If Tesco has followed the rules, and well they might, they should welcome an inquiry.
Talk about glass houses…
What about Loblaws in Canada, are they next?
There’s a saying that goes something like this….”Be careful what you ask for…”
My guess is that if the US government really took a serious look at all of WM’s business practices, the least of WM’s worries would be that of the practices in the UK.
When in Rome! Can’t believe who’s whining here.
There’s something surreal about a Wal-Mart CEO inviting government scrutiny into competitive fairness. No doubt, Tesco is a hard-driven competitor, but somehow when a quarter-trillion-dollar global company raises these issues, it sounds a little like whining. I’m sure Mr. Scott was thinking about the “level playing field” when he made his remarks, but from an image perspective, they were ill-advised. When you’re Wal-Mart, the normal rules of communications don’t necessarily apply.
Lovely update to an old story:
“Wolf Cries Boy!”
Scanner is dead on.
Full disclosure, as you guys would say – I detest everything about Tesco and only set foot across their threshold occasionally in the name of research. I NEVER give them a penny of my hard-earned money although I do a fair amount of consumer research into why other people feel compelled to do so. Right. Got that off my chest. Now then, my response to this discussion is – pots? black? did I hear/read right? Surreal hardly begins to describe it.
Wal-Mart has market shares of 34% in New Mexico, 45% in Oklahoma, 29% in Missouri, 35% in Louisiana, 50% in Arkansas etc. We could go on and on all day long. This is based on recent reports from a trade paper. There are probably not too many small rural southern communities where Wal-Mart does not have less that 50%.
Wal-Mart should keep quiet and try to keep flying under the radar — if that is possible. Many underestimate Wal-Mart’s true grocery market share. Often they will claim that grocery is only 30-35% of Supercenter sales. What they don’t tell you is that does not include HABA, pharmacy, and pet food. Not only does Wal-Mart not want you to know just how well they are doing, the competition does not want to believe it either.
As the market share is measured across a nation, the loophole there is that you can’t count the market share for each state so WM is quite OK to stay the way they are and they will not be investigated. On the other hand, Tesco is not and they have gone over a quarter market share in the UK. If WM is confident enough to call for an investigation, I say ‘fair play’.