Tesco should be copied, not demonised

 

OPINION:Outrage over Tesco demanding discounts from suppliers ignores the fact that inefficiencies were built up in the good times, writes SARAH CAREY

OH DEAR, what should we do? Boycott the stores or buy their shares? Sorry, folks. The liberal outrage failed to be provoked on this one. Maybe it was because my club card vouchers arrived the same day the supermarket was revealed as a Moloch in our midst, consuming all in its flames of avarice.

I do about 60 per cent of my shopping in Tesco and earned €16.50 in money-off tokens over a few months. It’s a rather modest bribe, I know, but sufficient to encourage me to reflect on Tesco’s behaviour. Having caressed my club card for several minutes, I decided that not only is Tesco doing the right thing, but it has established a model that everyone should follow.

Every business person I know is doing the same thing. Faced with a fall-off in demand, they are calling up their suppliers and demanding discounts. The suppliers who want to stay in business agree and do the same thing to their suppliers. From the top down, wages are being negotiated downwards and overheads that had quietly crept out of control are being slashed. Over the past few weeks I’ve spoken to several small business owners who were energised and optimistic about the process.

They berated themselves for allowing inefficiencies and bad practice to develop in the good times. The last six months called for a little panic and a lot of work.

They’re confident that harsh measures now will see them sail out of this recession leaner, tougher and in better shape than when they crashed into it. They know they have a few years to go – but he who survives thrives.

This is not just about individual business, but the whole economy. Prior to our adoption of the euro our government had a tried and tested way of dealing with economic shock – devaluation. It made our exports cheaper overnight and aided recovery. It also reduced our spending power. Because it’s unilateral, the pain is applied suddenly, evenly and renders resistance futile. We can’t drive down prices through devaluation anymore, but the job still has to be done.

We have to simulate devaluation. Product by product and wage by wage, everything must come down. Unfortunately that’s a longer, messier process than currency devaluation.

As commenter Karl Deeter said on the Irish Economy website back in February: “Devaluation . . . y’know, it reminds me of daylight-savings time. Do it and nobody complains but instead ask people to come into work at 8am for six months of the year and there would be uproar!”

Cue uproar.

We have a saying at home, coined from the days when cars were rare and a labouring mother needed to get to hospital. As a debate ensued as to which neighbour would bring her, the husband intervened: “Well, whatever yiz are doing yiz’d want to do it quick.”

Without political leadership, devaluation has become a grass-roots movement instead of a national macro-economic policy. It’s slower and therefore increases the risk of a deflationary psychology setting in – people being reluctant to spend because they think prices will be lower next year. That will prolong the recession. So, whatever we are doing, we’d want to do it quick. Don’t demonise Tesco: copy them.

Of course, none of this removes the ethical dilemma posed by shopping with evil multinational conglomerates. Tesco can do its worst, but it’s pointless for outraged commentators to participate in a contrived debate on the failure of English supermarket chains to stock Irish products without acknowledging certain realities.

The first is that whatever Tesco does will be demand-led. If Irish customers insist on buying Irish products, the products will stay on the shelf. The second is that no business – whether a local village shop or Barry’s Tea – is automatically entitled to customer loyalty. That loyalty is earned through lower prices or higher quality.

I would never expect a local shop to compete with Tesco or Aldi on price. However, I do appreciate that they pack my bags, greet me by name and help me carry my purchases to the car.

Finally, although the supermarket industry is a pyramid with Tesco at the top, it also looks like a circle. What goes around comes around. As customers’ sense of obligation to local business declines, they should bear in mind that so does the obligation of local business towards them. When school fundraisers come round next year, before parents turn with a heightened sense of entitlement to local shops for sponsorship, they should ask what contribution Sainsbury’s in Newry or Lidl makes to the community.

Tesco contributed vouchers as raffle prizes to our school fundraiser last year and we were grateful. As long as they continue to do their bit for our community, I’ll continue to collect my club card points with a clear conscience.

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