Leahy defends supermarket role

At a time when the UK supermarket sector is under increased scrutiny because of the plethora of bids for the number four player Safeway, the role played by supermarkets in improving consumer choice and convenience has been defended by Sir Terry Leahy, chief executive of the country's biggest food retailer, Tesco.

Speaking at the University of Hertfordshire earlier this week, Leahy said that there were "a number of contradictions in the most common criticisms you hear about supermarkets - be they Tesco, or any of our competitors"​.

He continued: "You hear people say that we are too big. We have too much power, too much muscle. People accuse us of being an oligopoly, and are therefore able to ignore the wishes of the consumer. Worse, we are charged with destroying small communities, trampling on the traditional butcher, baker or corner shop whose shops characterised the high streets of old. We are told that we use our strength to batter down the prices of goods from our suppliers and farmers.​

"And we are put in the dock for not doing enough to help society, for profiting while not contributing to the communities we work in - something that you often read on the charge sheet for successful, thriving industries. People say we don't offer real jobs. So, as you can see, we seem to have quite a lot to answer for."​

But Leahy then went on to counter these arguments, starting with the accusation that retailers are so large that they can ignore their customers' wishes. He said that the old style of shopping - visiting a wide range of small shops with a limited choice of products and higher prices - had largely disappeared not because of "the power of the politician, nor even the power of one or two clever businessmen, but the power of the consumer in an open market. Consumers have shaped and created our industry"​.

"We, the retailers, depend on them, the consumers - not the other way around. Major retailers like Tesco are a mirror of society, changing as society changes to respond to new needs and demands. When society winks, we wink back. There, in the aisles and checkouts of the main retailers, society expresses its wants and wishes, day by day, minute by minute. We have to respond to those wishes, every moment of every day.​

"Each of us is only as good as our recent record. Think how our sector has changed. Just ten years. Sainsbury and Safeway led retailing. Tesco and Asda, now owned by the mighty Walmart, were struggling. And in those ten years, Marks and Spencer rose, fell and then rose again. The rise and fall in companies' fortunes shows why shopkeepers must remain alert to what men and women think and want. If they don't do that, custom - and the profit - will go elsewhere."​

Listening to what consumers want, according to Leahy, has also led to the most sweeping change in food retailing in the last generation: convenience. Any number of factors have increased consumer demand for conveniently-located stores offering a range of convenience products: the widespread of the car, the fridge and the microwave, more working mothers, more people spending more time commuting to and from work. "Retailers have had to respond to this. The choice retailers faced was 'change or collapse'. Failure to change meant failure to perform our most basic role - delivering what consumers want."​

He continued: "Our role, and our task, is to respond to the different, changing needs of customers to deliver what they want, when they want it. And this, perhaps, goes some way to explaining the love/hate relationship that some consumers have towards large retailers. They can see our response to the changing needs of consumers on the streets of their towns and cities, and sometimes some find that response unsettling. Stores are open on Sundays. Many stores are open for 24 hours. Some stores are built on the outskirts of town. Old stores - a favourite haunt for some - close down.​

"Such change is bewildering. The kneejerk reaction is to blame the supermarkets for such changes, instead of asking 'why are supermarkets doing this?', to which the answer is 'society is changing, demands are changing, and so we must change as well'."​

Commenting on the oft-criticised relationship between Tesco and its suppliers, Leahy said accusations that while the supermarkets profit, suppliers and farmers suffer were unfounded. He said that British farming was suffering at the hands of problems such as BSE and foot and mouth disease, the strength of sterling and the CAP - not because of supermarket pressure. It is consumer demand for low prices which forces Tesco and its rivals to be rigorous in their dealings with suppliers, not a desire to create massive profits at suppliers' expense, he said.

Even though meat is often cheaper abroad, Tesco consistently buys its meat from UK suppliers, he added. "Why do we stock British goods? It's not simply because we want to support British farmers, but because consumers tell us that they want fresh, locally sourced food. So it is certainly not in the interests of Tesco, or any major food retailer, to see farmers and suppliers suffer. We, the supermarkets, need them to flourish, so they can invest in their businesses and help us react to consumers' changing demands."​

Whether any of this will wash with the many critics of the supermarket sector, and of Tesco in particular as market leader, remains to be seen, of course. The positions of the retailers and their critics are highly entrenched, and little either side can say or do is likely to convince the other to change its mind. But with the government review of the supermarket Code of Practice currently underway, we are likely to more of this kind of argumentation in the coming months as retailers fight to defend their positions.