London Briefing: Napoleon famously derided the British as a "nation of shopkeepers", a description no doubt apt in the early 19th century, but less so today, perhaps, as we observe a nation of supermarket chains.
British retailing provides wonderful case studies on management failure and success. The role of fashion and fads in customer behaviour is richly apparent. Marks & Spencer is an example of all the ups and downs that can afflict the retail trade.
Why is M&S, once the dominant force in clothes retailing, returning £2.3 billion to its shareholders in a buyback program of 27.9 per cent of its share capital? The most visible reason is that the company undertook to return cash to shareholders as the main plank of its defence against the hostile takeover attempt by multi-billionaire Philip Green.
Share buybacks are a two-edged sword: they can be welcomed as a sensible move to reward shareholders during times of high profitability, but they can also be seen as evidence of management failure. If the cash cannot be sensibly reinvested in the business, it suggests that management has given up on growth prospects.
Sometimes, buybacks are the result of financial engineering that gear up the balance sheet: more debt is taken on to retire equity. Cynical commentators see such exercises as a short-term way to boost share prices to benefit management enriched with share options.
Neither of these explanations necessarily fits the M&S case, where a successful part of the business - the financial-services arm - was sold off to raise the cash to buy off shareholders. The reason why all this happened in the first place is that M&S management failed to spot that the tastes of the British consumer were changing. It was inevitable that somebody like Mr Green would step in.
Mr Green's unsuccessful bid to buy M&S led him to make several very critical remarks about the City and, in particular, analysts who recommended M&S as a "hold" at 270p and, quickly thereafter, "overweight at 370p". All of this merely reinforced his much earlier decision to steer as clear as possible of City institutions and keep most of his business private. Under stock market regulations, Green cannot launch another bid until February.
If M&S represents failure in the clothes-retailing arena, Sainsbury has acquired a similar reputation in food retailing.
Morrison, one of the few other successful food sellers, bought Safeway earlier this year and is now actively disposing of the bits that it does not want.
Global giant Wal-Mart owns Asda and, well, that's about it. Few could name any other serious players in the UK food-retailing business. Aldi, Lidl and Safeway are small: there seem to be few challengers to the dominance of the large chains.
This leads some to ask about competition. While the retailers themselves claim high-street pricing is more cut-throat than ever, the margins earned by Tesco, in particular, do raise eyebrows. Further consolidation is possible but would trigger a competition inquiry.
The growth of the supermarket was triggered by the abolition of "retail-price maintenance" in 1964, which switched pricing from manufacturers and suppliers to the shopkeeper. Economies of scale dictated what happened next.
Some people have always railed against the demise of the corner store. Rod Liddle, writing in this week's Spectator, repeats many of the moans of those who believe nothing of quality comes out of a supermarket.
He notes that where you shop is now a key marker of British social stratification. "Chavs" are seen in Lidl and Safeway, the middle classes in Tesco while the bourgeoisie go for Waitrose. "Chav" is the nearest we have in the UK to the US idea of "trailer trash". The best definition is: "a young person, often without a high level of education, who follows a particular fashion". Perhaps M&S really is doomed if this is what we have become.
