Belfast Telegraph

Amazon the grocer promises to give Tesco run for its money

By David Prosser

This could be fun. For some time now, Tesco has been able to get away with dominating the markets in which it operates, with competitors battling only for the number two spots.

Now, in one area at least, comes a potential rival that Tesco really might lose some sleep over.

Amazon's launch into the online groceries market — a sector where Tesco's share beats that of all its competitors combined — will be fascinating. This is a company with the resources and the imagination to give Britain's biggest grocer a real run for its money.

It may not make much of a splash straight away. There are significant drawbacks to Amazon's offering — no hourly delivery slots, different parts of each shop coming from different suppliers, and the lack of a shopping list facility on its website - and some quick comparisons suggest it may not be any cheaper than the traditional supermarkets.

But Amazon does have fantastic distribution and marketing, access to suppliers of all sorts of speciality items and the experience of dealing with 160 million customers worldwide.

Tesco may fear that Amazon's launch into its core market might erode some of the British grocer’s success in selling non-food products. Electricals, books, music — all key areas for Tesco — are exactly the product ranges in which Amazon excels. The launch may also threaten the power that Britain's supermarkets have over product suppliers. There were some clear hints yesterday from product producers large and small that their support for Amazon's launch reflects some frustration over the way in which they have been treated by the grocery sector over the years.

Some might assume that since Amazon knows little about selling foodstuffs it does not pose a threat but in the online retail market, whether you're buying tomatoes or televisions, companies stand or fall on the quality of their technology and logistics. In that context, Amazon can be a formidable competitor.

n One can understand Sir Stuart Rose's frustration over the latest complaints about the remuneration policies of Marks & Spencer.

The retailer's chairman was pretty dismissive yesterday about suggestions he might find it difficult to get shareholders' backing for the company's remuneration report at next week's annual general meeting, particularly in the context of the strong trading update M&S unveiled.

Still, Sir Stuart must be aware of the head of steam that is building up against M&S on pay — in particular the £15m package handed to Marc Bolland, its new chief executive. It is not just the usual suspects — activist groups such as Pirc and Manifest — that have voiced their concern, but also more conservative investors, including the Association of British Insurers.

These days, the fact that a company is trading successfully does not necessarily preclude a bit of bother with shareholders. Tesco's agm last week was noticeable in two regards — the steady stream of shareholders who wanted to thank Sir Terry Leahy, its outgoing chief executive, for his success at the retailer, and the hefty vote against its remuneration report.

Quite right too. One positive effect of the financial crisis has been that many more shareholders now understand it is their duty to hold the boards of companies to account and not just in the financial services sector. Where investors would once have looked the other way on matters such as pay, as long as performance was heading in the right direction, now they're prepared to stand up and be accounted. Long may it continue.

The issue at stake here is not whether M&S is performing well — it seems to be - or even whether Marc Bolland is a decent appointment - as there is every reason to think he will prove to be — but the extraordinary rewards the new chief executive has been promised. On any reasonable basis, they look excessive, and investors are right to say so.

Belfast Telegraph

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