So Tesco became the first British company to ever post profits of over £2 billion ($3.83bn). Tesco is now in the top 3 retailers in the world along with Wallmart in the US (who own Asda in the UK) and Carrefour in France. Tesco’s success is based fundamentally on their supermarket core but has become far more than that as supermarkets in the UK have changed radically in the last decade becoming more like American grocery stores.

Tesco operates more than 2,300 stores in 13 countries including Japan, Poland, Turkey, Hungary, and a joint venture in China. The UK remains its largest market, where sales for the year rose 11.9%. Non-food sales rose 17% to £6bn, with the group highlighting a 28% increase in sales of its clothing range. Profit at its online operation grew 51.8% to £36m, on the back of sales of £719m. Tesco said sales at its international operations in Asia and central and eastern Europe were up 13.1%.
Tesco’s underlying profits figure excluded profits on disposal of assets, integration costs and goodwill amortisation. Including these, Tesco’s pre-tax profit rose 24.5% to £1.96bn.

Tesco’s claims that it plans to create 25,000 jobs globally this year of which 11,000 will be in the UK.

Now obviously my views on capitalism are clear and I see it as profane that since Tesco shares have risen by about 25% in the last 12 months there will be a number of middle and upper class people who will be reaping the benefits of this increasing mall based culture that is altering the buying habits of the working class more than anyone else.

However what intrigues me is that in the wake of this information from Tesco’s are items such as the Federation of Small Businesses which has said that this should be ringing alarm bells since it is signalling the continuation of the demise of the traditional independent shops and the High st. in general. More specialist retailers such as Marks & Spencer have seen a steady decline of their sales as Tesco’s has increased it’s coverage in their principle business areas such as clothing, consumer electronics, home wares etc.

It is no doubt that the rise of retailers such as Tesco’s and Wallmart lead to a homogeneity across the retail sector that leads to what people may see as an increase in their choice within a shop but is a lack of choice outside of that. Whilst many analysts say that consumers in Britain have started to become annoyed with Tesco’s dominance and will often take their business elsewhere the following graph illustrates not a trend away from this type of spending pattern merely a choice of a different conglomerate retailer. Whilst consumers may not want to go to Tesco they are still wooed by the notion of having everything in the same shop.

What I’m afraid I fail to see is why anyone can be especially surprised or upset by this dominance of the market of the big players. This is the nature of capitalism where success is ultimately measured in your ability to outdo the competition. This is why I see capitalism as an essentially flawed basis for a system because it works on the premise that consumer choice and freedoms are paramount but on the flip side the companies have an ultimate goal of monopoly because this is the true measure of their success. You doubt this? Well it’s not as if there aren’t plenty of precedents for it, Microsoft being but one prime recent example. You see in the capitalist system a company must appeal to its consumers whilst in its infancy. It must expand its appeal and broaden its market and attempt to compete with its rivals. To do this it must move in on their territory, take their customers, undercut their prices etc. etc. The way I see it Tesco is the embodiment of a successful capitalist enterprise. You don’t have to like it, but to expect capitalism to work in any other way is simply naivety. Or am I missing something?

Song Of The Day ~ Buffalo Springfield – Stop, Children What’s That Sound?

Original Comments:

Mark Ellott made this comment,
I had a really heated discussion on this subject a few years back when Walmart bought Asda. While the conglomerates meet the buyers’ demands, they do so at the expense of the smaller retailer. It is the smaller retailer who is left with the high risk, low turnover goods. So you can buy pet foods in Tescos, but the small pet shop who relies on these to make a profit goes under. Now where do you buy, for example, your hamster? Or if, like me, you are into exotics, your reptiles? People often fail to see the implications of pile-it-high-sell-it-cheap retailing. Until they can’t get a hamster for love nor money, that is.
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[Redbaron responds – You are exactly right Mark, the big supermarkets do not like to be left with high inventory, part of their strength is that they buy in huge bulk because of the ability to shift such a vast amount of stock. The lack of high-risk low turnover specialist items is not good for the options of the consumer and will not be fulfilled by the specialists who’s margins have been eroded by the MNCs under-cutting them for the peripheral items. Your pet shop example is a good one, you can use the same sort of analogy about electronics. I could buy a new stereo in Tesco’s but I have around 500 records and where do I go if I need a new stylus?

You have therefore provided yet another reason as to the paradox of capitalism where the nature of the system is always going to mean that the interests of the business are the antithesis of the interests of the consumer and these only work for a brief period in time in a capitalist economy’s infancy.]

comment added :: 13th April 2005, 15:25 GMT+01
Katie made this comment,
They do make a rather nice wild mushroom cannelloni though. You can’t argue with economics, in an ideal world there would be perfect competition but there isn’t. Tesco (et al) gives people what they want i don’t like it, you certainly don’t like it, but that’s the way things are. Are you going to prohibit them from selling cat food? What gives us the right to do that? I particularly don’t like the way that tesco metros are springing up everywhere wiping out small local ‘grocery’ stores however, the other side of the coin is that it’s now cheaper to buy beans from your local shop. Market forces dictate what companies do, if “we” didn’t want it then it wouldn’t happpen. Government intervention to prevent full monopolys is the best and fairest thing that we can hope for and that’s what we currently get. Then again though, I’m a capitalistic microsoft bitch.
Big hugs, Katie x
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[Redbaron responds – Sorry hon but this is the typical bullshit New Labour neo-liberal argument. That classic “capitalism isn’t great but it’s the only show in town”. Why is it? We have been spoon-fed this notion that Communism is a good system in principle but can’t work in practice whilst all around us we are forced to settle for a system that is neither good in theory and reality shows us that it is fatally flawed in practice too. Your idea of state interventionist capitalism contravenes the concept of Free Market economics whilst you have a very naive assumption of the benign nature of supply and demand. Whilst it may be true that consumers can drive the market if they excercise the power, quite often in the case of the big retailers the trick is to give us the perception that we have a choice whilst directing us to what they want us to buy. Market forces only dictate company policy if companies passively allow it to.

But you’re right, you are of course a capitalist microsoft bitch not to mention a Daily Mail peddling one!]

comment added :: 13th April 2005, 19:01 GMT+01
baracuda made this comment,
I read somewhere that something like £1 out of every £8 spent in Britain is given to Tesco. That’s not £1 in every £8 that’s spent on food that’s in 1/8 of all the money spent in total.
I just find that statistic to be a bit scary.
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comment added :: 18th April 2005, 15:51 GMT+01