Tesco’s deal to get Barclays to take over its banking arm is a win-win situation for both parties.
The supermarket gets a chunk of cash upfront and an annual income from the partner linked to brand licensing, using its channels to grow the proposition and Barclays being part of the Clubcard scheme. Barclays gets to sell its products, albeit under the Tesco name, to a bigger pool of individuals.
AJ Bell’s Russ Mould said: “We’re in an era where companies are going back to basics – focusing on what they do best and letting non-core operations either be outsourced or sold.
“For Tesco, the deal with Barclays means it can concentrate on the retail side where fierce competition means being on top of its game at all times. It constantly needs to make the business more efficient, be clever with marketing, and learn from the oodles of data it collects from Clubcard.
“Grocery companies have tried lots of things over the years to apply their brands to different areas beyond food and drink. Cafes, garden centres, mobile phone networks, broadband, the list is endless.
“Supermarkets took the view that if a person chooses them as the place to buy essential items, then they might also want to spend on other areas such as in the utilities space and in more discretionary areas. Some of these initiatives have provided a nice additional income, others haven’t worked out as planned.
“Tesco shifting part of its business to Barclays isn’t a sign of failure, instead it is a recognition that its time is better spent on the bread and butter, not the jam on the side when it comes to banking.”
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