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Tesco/Booker Merger Will be Good for Retailers

The Tesco/Booker merger received CMA provisional approval this week. The combined turnover of this behemoth will be around £60 billion, significantly larger than the entire wholesale sector at around £25 billion. The merger has already set in train a number of related consolidation events in the sector and prompted wholesalers to take a fresh look at their businesses to get fitter and to take on the competitive challenges ahead. This can only be a good thing making wholesalers tougher, leaner and more resilient.

Without doubt there will be substantial advantages for Booker accruing from the merger.

  • The big gain will be buying prices and supplier terms. The enlarged group will have comparatively superior buying prices in the sector.
  • Booker stands to benefit substantially from Tesco’s technology and its customer engagement expertise.
  • Tesco’s range of added value services such as telecoms and financial offerings will be offered to Booker customers.
  • Booker can plug in to the Tesco supply chain which in turn will benefit the Group overall.
  • Tesco’s expertise in fresh food will be leveraged to give Booker a clear advantage in the sector. Particularly in fresh produce.

Don’t expect Booker to use their buying advantages to lower selling prices. The Tesco shareholders expect continuous profit growth and will not take kindly to price reductions.  Far more likely is the focus on improved service, range, availability and customer engagement.

Nevertheless the merger is good news for independent retailers.

  • Booker will have to work even harder to convince their existing customers that the merger will deliver benefits to them So expect to see a strong focus on support and service.
  • Wholesale competitors are already looking at ways to retain their market share. They are becoming better businesses as a result.
  • Expect wholesalers to work hard at improving service levels to retain and attract new business. This will include: added value services, stock availability, choice/range, deliveries and improvements in technology.
  • Expect wholesalers to improve their support for retailers through symbols, retail clubs and packages to help drive sales through small stores.
  • And expect wholesalers to respond very quickly to your demands.

This merger may appear to be an already dominant operator further strengthening their position in the market. Of course this is true but the beneficial side effect is that the entire wholesale industry has been shaken out of its slumber and is having to raise its game to earn your business. You will be the winners.

David Gilroy

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