Sainsbury’s plan to throw in the towel on banking is symbolic of the struggle retailers have had in applying their financing skills.
In the 1990s, large retail groups decided that the banking industry needed consumer knowledge. It seemed that the oligopoly of the big banks would be tested.
Newcomer to the scene HBOS, a combination of Halifax and Bank of Scotland, recruited Andy Hornby from Asda, believing he could give the company an edge in competition with NatWest, Barclays, HSBC and Lloyds.
The experiment went terribly wrong. HBOS came within seconds of collapsing in 2008 and had to merge with Lloyds.
Incredibly, Lloyds signaled for a few days that Hornby would be an asset before the HBOS mess came to light.
In the 1990s, large retail groups decided that the banking industry needed consumer knowledge. It seemed that the oligopoly of the big banks would be tested
No such disaster has occurred at the grocery banks. But as regulations tightened after the Great Financial Crisis, the regulatory demand for more and more capital quickly became a burden.
It wasn’t the best way for retail groups to free up cash at a time when they were facing food woes from German start-ups Aldi and Lidl and a new generation of online clothing retailers.
Marks & Spencer handed over the keys to HSBC, the co-operative joins Coventry Building Society and Tesco Bank wants out.
Metro, the only new challenger taking a consumer-friendly approach, faces reporting and capital issues.
At a behind-closed-doors session in Davos this week, led by Barclays and international financial group Manulife, major global players discussed how to respond to the competitive challenge from fintech and private lenders.
JP Morgan’s Jamie Dimon saw it coming for a while and has invested in no fewer than 80 fintech companies around the world and launched digital bank Chase.
Fintech banks have also struggled with regulation. Research published in Davos shows that customer growth has increased by more than 50 percent across all sectors and regions. The sector is particularly successful among underserved consumers and businesses.
Products turned out to be cheaper than traditional banks. Companies like British start-ups Revolut, Wise and Monzo may have had their problems. But now that supermarkets are disappearing, they are the next wave.
To turn on
Currys should run away. After all, it is the last electronics store in most UK retail parks.
The big battle took place abroad, in the Scandinavian countries, where things went seriously wrong, and in the mobile sector, after the misjudged Carphone merger.
Both are finally correcting and despite a dull British Christmas in front of new TV screens, chief executive Alex Baldock unveiled a profit increase from £105m to £115m for the current year.
Unless more accidents happen, better times should be ahead.
Mobile phones are doing well, including the pricey Apple iPhone 15 and the Samsung flip screen model. Difficulties in Scandinavia are easing and full margins have recovered thanks to subdued sales.
New games and consoles are roaring away and should continue to do so, and there is hope that with the Olympics and football’s Euro 2024 this summer, the TV doldrums will disappear.
Currys, like other retailers, is despairing over a business rates system that favors Amazon’s large warehouses over stores, but is managing to maintain its lead.
As debt disappears, helped by Greece’s divestment, more attention is being paid to investing in the integration of systems that allow better control of foreign operations. As for customer service… that’s a different story.
VAT victim
There is no better example of why the Chancellor should end VAT on foreign visitors to Britain than the achievements of Watches of Switzerland.
Lower priced watches cost around €5,000 and prices can go up to €30,000, making it crazy to shop here.
For British retailers, the US is often the problem and the home market offers a solution. The reverse is the case with the luxury watch group.
A profit warning due to disappearing UK sales caused a disastrous 37 percent collapse in shares.
Homegrown shoppers would be better off going to Paris, staying in a five-star hotel, dining in a top restaurant and coming back with something tasty and some change.