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Well, yes

The retreat of Britain’s two largest supermarkets from the banking world underlines the difficulty of competing with the “Big Four” — Barclays, Natwest, Lloyds and HSBC.

“At the end of the day, where do you want to put your money?,” says former Sainsbury’s chairman Sir Philip Hampton.

“You wouldn’t buy your potatoes from HSBC, probably because you’re not sure they have a particular capability of selling potatoes.”

As in, a brand name is great, but a brand name for what? Rolex is a great brand name, but how well would it work on baked beans?

I do like this though:

When Tesco and Sainsbury’s launched their banks in 1997, there were no smartphones. The cost of placing a branch in a supermarket was relatively minimal.

Now that competitive edge has gone.

“Life has changed,” says KBW bank analyst Ed Firth. “Banking used to be a branch based business and therefore the supermarket’s had competitive advantage because they effectively had branches everywhere.

“But it’s not a branch based business anymore. You don’t have the synergies that you had when they set off.”

That’s someone thinking about the economic basics. Something far too rare.

9 thoughts on “Well, yes”

  1. Didn’t the supermarkets just back off their banking business to someone else ? They didn’y actuall own banks did they ?

  2. Bloke in North Dorset

    I thought the supermarkets were more about small savings and loans, an extension of their Christmas Clubs, with branded credit cards. A useful customer retention scheme but nothing serious.

  3. Tesco’s bank has 5.2 million customers. It also has a brand name familiar to all and of course is covered by the FSCS guarantee. Getting customers shouldn’t be an issue were they to advertise it more prominently in store. It does however have about 3,500 employees which seems heavy for the size of customer base. Profit per employee is probably low compared with their retail operations and their retail focused senior management probably don’t care about it about it like they care about selling a tin of beans. The easy solution is to sell it off with rights to the new buyer to leverage the brand name (with reputational damage clauses) and let the new buyer grow the customer base and reduce the number of employees.

  4. If my experiences are representative, Sainsbury’s Bank failed to a) invest in the necessary systems and b) grasp the importance in banking of following customers’ instructions.

  5. Bloke in the Fourth Reich

    Bad example, Rolex being the baked beans of pricey watches.

    Rolex is for people who think they need to be seen wearing an expensive watch but have no independent taste of their own. That’s why there are Rolexes available across the entire price range of expensive watches.

  6. I used to work with a bloke repaired watches. Apparently (then) there were a limited number of movement makers. So when you opened the case it’d have one of them. Which one wasn’t particularly represented in the price of the case. I know that Omega & Rotary were both basically the same watches. That may have changed, but I doubt it.
    Fair ’nuff. It’s a watch. If it keeps time it serves its function. What’s inside is between the watch & the repairer.

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