Christine Seib
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Having seen off its rivals on the high street, Tesco is now taking on the banks in its latest plan for global domination. Yesterday the supermarket giant bought Royal Bank of Scotland out of its Tesco Personal Finance (TPF) joint venture for £950 million.
Having taken a 30 per cent share of the food market, Tesco used the latest acquisition to announce that it was stepping up its assault on the services sector. Tesco estimates that it can make £1 billion a year from services such as personal finance, telecoms and online shopping, up from about £400 million last year. Sir Terry Leahy, Tesco's chief executive, said: “Services are bigger and faster-growing markets than food.”
Andrew Higginson, the group's finance and strategy director, will become chief executive of retailing services, overseeing a beefed-up services team. The wholly owned TPF will be run by Benny Higgins, the former head of HBOS's retail business, who left the bank last August after his sales strategy saw HBOS's mortgage market share halve to 8 per cent. In 2006 HBOS had used a £1.1 million a year package to lure Mr Higgins from RBS, where he had overseen the Tesco joint venture.
Tesco has also hired Iain Clink, formerly head of cards and direct finance at RBS, to become TPF's finance director. Lance Batchelor, who joined Tesco a year ago from Vodafone to become UK marketing director, will move to run Tesco Telecoms.
Mr Higginson denied that the increased focus on services was an admission that Tesco was struggling to increase its share of the food market. This month it emerged that Tesco had developed new own-brand products after hard-pressed families defected to discount retailers such as Aldi.
“People are spending more of their disposable income on services,” Mr Higginson said. “It's one of the fast-growing streams where we think we can do something going forward.”
He said that RBS would continue to supply TPF with financial products to sell but some of those contracts would end within two years. TPF sells general insurance, credit cards, personal loans, simple savings products but plans to move into new products. “The current account is one we'd look at very carefully because that's at the core of peoples' relationships with their finance services provider,” Mr Higginson said. He said that at present margins on mortgages were too low for Tesco.
TPF delivered £206 million in pre-tax profit last year and is expected to make over £240 million this year.
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Someone on the Board at Tesco should make a real effort to investigate the contrarian long term implications of turning towards the FIRE economy. (FIRE, Finance, Insurance and Real Estate), when the real need is to return to an old fashioned economy dominated by savings invested back into industry.
Chris Coles, Medstead, Alton, United Kingdom
We will soon all be working for Tesco. It is accepted in the legal profession (of which I am part) that when the law changes they will move into legal services. Doubtless it will then be midwifery and undertaking. From the cradle to the grave with bonus points
M Taylor, Hoddesdon, UK
Its actually £1 in every £7 or £8 is taken by Tesco. Thats a mammouth figure when you think of the money spent on the high street every year.
Pete, Manchester,
If Tesco wasn't competitive then people wouldn't do business with them. As for Sainsbury's, I'm comvinced if they got rid of that awful colour they use in their marketing more people would use them. It's a terrible colour and puts me off immediately.
Derek, East Yorkshire,
Giant business' are competitive to kill off compeditors, and then the easiest way to increase profits is to increase prices. Shopping in Dublin in say Merrion Centre Tesco is very expensive as compared to the UK....
Alan , Dublin,
yes indeed martin from shannon if it wasn't for tesco..
what's more if it wasn't for tesco we would have corner shops and community and know our neighbours and live safer, more fruitful, happier lives. if it wasn't for tesco.
peter jones, moscow,
This has been coming for years ... if the banks can't do the job properly what do you expect !
Benzo, Nr Chelmsford,
Better them than ASDA and its US owner, let them fight its competition and maybe better/more competition in the finance sector would have saved us from some of our present problems
am, letchworth,
No one is forced to shop at Tesco. No one has to buy furniture, food, DVDs or fill up their cars from Tesco. It is personal choice. Most people shop at Tesco because it is good value and cheaper than elsewhere. Stop The Knocking. If you don't like it, shop elsewhere and pay more.
Peter, Chester,
Looks like a good deal for RBS to me.I would like to know settlement timing details.The mortgage market is going to be flat as a pancake over the next 3 years
Pile it high & sell it cheap is fine for groceries but I doubt if the public see it that way for the biggest transaction of their life.
Bob Greenaway, Tamarin, Mauritius
I bought a Dell computer from tesco the other day. Tesco £259. same spec Dell Direct £389.Tesco has excellent instore customer services. Also the items I have got from tesco that developed problems were replaced instantly. I am not stupid enough to give £130 to Dell just to avoid shopping in Tesco
Bernie Baeten, carmarthen, wales
Martin, shannon, ireland
Is incorrect if you lift the price lable up on the 2 for one's at the end of each row and check the price per Kg against normal price items in the row, you will note the normal price per Kg is usually 20%-30% cheaper.
On local markets fruit and veg is up to 60% less
Nicholas Iles, Oswestry, Shropshire, United Kingdom
Rob,
Granted the competitive framework for the energy market isn't working as well as it should. What is required is for a break-up of vertically integrated energy companies.
Good on Tesco though. It's about time they ruffled the feathers of the Big Banks.
Rod, Londres,
Martin in Ireland. 'The more competition there is the better it is for the consumer'
Would you say that is also true of energy companies? We have never had so much competition but the prices are soaring, a lot faster than in other EU countries. I think you must work for Tesco.
rob, ashbourne, uk
tesco makes a huge amounts of money off the British public, I believe £1 in every £12 spent in the UK goes to Tesco, yet to save a few thousand a year they take jobs out of the UK and move them to India. They should be putting back something in the economy that has served them so well. no loyalty.
simon, Cardiff,
If it wasn't for tesco's we would all be paying full price for every product and service. The more competion there is the better it is for the consumer;after all what other company rewads you for loyalty and offers top quality goods and services to its customers.
Martin, shannon, ireland
An inflated opinion of their own ability? Downhill all the way now. Get out quickly. We've stopped shopping there because they are heading the same way as Sainsbury 3-4 years ago - can't keep the shelves stacked so lose sales even when they get you into the store.
A.M. Williams, Stafford,
So then you could buy your house from Tesco, then furnish it with furniture from Tesco, buy food from Tesco, entertain yourself with DVDs from Tesco and drive your car which is fuelled by Tesco (and of course insured by Tesco), pay in restaurants with Tesco clubcard deals.....they are taking over
Vicky, Bristol,