I was interested to read the News Analysis (MW January 30) addressing the issue of supermarket brand extension into financial services.
There is no doubt that Marks & Spencer, Sainsbury’s and Tesco while each employing quite different internal infrastructures, have made some important changes to the way in which banking and financial services are perceived and distributed to customers.
I have long held the view that, if we are content to let Sainsbury’s and Tesco handle a significant portion of our weekly expenditure within a well-established relationship, it is not too much of a stretch to trust them with our money on a slightly longer-term basis and, indeed, to borrow from them. After all, the financial services industry does not exactly inspire much trust at the moment.
I am intrigued, however, by the likely effect of the Sandler and Pickering reports, which propose a much-simplified regime for the provision of pension and savings products, at a lower cost to the general public and offer every encouragement to the new players, such as the supermarkets, to become even more involved in these areas.
But, whatever improvements the supermarkets have brought to the marketing of financial services, they still need to make a good profit and with much lower charges on financial services products, it will become evermore difficult to make the required margins. Brand extenders entering financial services have traditionally seen it as a very lucrative area and it will be interesting to see if the prospect of reduced margins inhibits further development.
The article questions whether trusted high street brands should consider offering more complex savings and investment products, considering the obvious uncertainty and lack of performance guarantees. For me, the key issue is whether the strength of a familiar and trusted brand can overcome the power of a traditional distribution channel and change the way we view these products. In other words, will someone who is used to buying a pension from a salesman sitting in the front room be prepared to do business over the telephone, or in store?
My hunch is that well-known high street brands can overcome people’s understandable nervousness in entering some of these complex markets. If so, they have a real chance to change the face of financial services distribution.