When I first saw the sign that a Fresh & Easy Neighborhood Market would be built in
Lemoore, CA, a small town in the San Joaquin Valley, it sounded like a great concept, at least the “fresh” part of the name. The sign claimed it would sell locally sourced organic produce.
Last week I stumbled across a report on Fresh & Easy stores, which are owned by the British retailer Tesco, by Tinderbox, the wing of the Hartman Group that analyzes consumer culture and trends. Tinderbox employees visited Fresh & Easy stores in San Diego and Phoenix. The biggest challenge, according to the report, facing Tesco is their business model. Half of their name is “easy,” and consumers do not find grocery shopping difficult.
As the report states,
“Tesco appears to be making one of the hallmark mistakes of the contemporary branding epoch: they are focused on solving problems rather than offering opportunities. Moreover, they appear to be solving for a problem that doesn’t really exist among the natives. In this they are not unlike the above-mentioned fabled missionaries attempting to spread the gospel to peoples which were, in truth, pretty happy to begin with.”
Three important myths of food retailing
Within Tinderbox’s report is a list of the three important myths of food retailing, lessons any food retailer should keep in mind. Consumers always look for ‚Äòone-stop’ shopping solutions, is the first myth. The reality is that consumers actually prefer to shop at a wide variety of retailers for food and household items.
Consumers find shopping difficult and will shop at stores that make shopping ‚Äòeasier,’ is the second myth. Actually, grocery shopping is not difficult. What consumers want is shopping environments that are not boring and unattractive, with polite employees.
Food retailers should try to be “all things to all people by appealing to the ‚Äòlowest common denominator’ consumer preference, is the third myth. Consumers shop at many different “specific retail experiences” to buy food, beverages, and household items.
Tesco takes a different approach
Employees of the consulting company, Willard Bishop visited two stores in the Phoenix area to compile a report on the Fresh & Easy stores. The report noted that the track-record of foreign grocery store retailers in the U.S. is poor. The report also noted that during visits the stores were “significantly challenged by out-of-stocks, especially in fresh offerings.” Considering half of the name is ‚Äòfresh’ that is not a good sign.
Tesco uses private brands almost exclusively, according to the report. Conventional wisdom says to stock a variety of brands, and keep the prices of private brands lower than national brands. “Tesco takes a different approach,” as the report states.
It may not be the wisest approach, considering the amount of investment Tesco has put into its Fresh & Easy stores. Sixty stores are open in the West Coast, with 150 more planned. The first stores opened in November
Last February an analyst for Piper Jaffray said that sales at Fresh & Easy stores missed its early sales target by 70 percent. The stores only brought in $30 million over six months, instead of $100 million. Tesco’s Chief Marketing Officer said that the company is “extremely encouraged by our sales, and customer numbers.”
Jim Prevor, a supermarket analyst, looked at Tesco’s earnings report and noticed the information about Fresh & Easy sales was not clear. Prevor has analyzed the stores extensively, and commented that “in dealing with this company we have learned that in many cases what they don’t say is more important than what they do.”
Based on what Prevor considered to be the most important clues about the stores earnings, he estimated their earnings to be $90,000 to $100,000 per week, per store, which falls short of the $200,000 projected by Tesco, is more than what Piper Jaffrey estimated. However, Prevor is doubtful that Tesco is being completely honest about the stores sales.