So, Tesco’s Fresh & Easy misadventure in the US is drawing to a close.
So, Tesco’s Fresh & Easy misadventure in the US is drawing to a close. Like David Beckham’s sojourn in the US, its arrival in California was a much trumpeted debut that attracted fevered press coverage, but ultimately amounted to not very much aside from several faux pas and an enrichment of the American economy by a slightly misguided British visitor.
I’ve always been in a small minority of optimists regarding Fresh & Easy. For me, the biggest problem was the shockingly unlucky timing of launching a new business in some of the states worst affected by the financial crisis. Aside from this unforeseen hurdle, there were several operational errors, including store locations, marketing (or absence thereof), range, packaging, checkout systems, lack of couponing and lack of loyalty card.
These mistakes all contributed to a distinctly underwhelming proposition for the American grocery shopper and created a correspondingly unsuccessful business. Tesco’s assurances that it had lived among the natives and knew their shopping and consumption habits appear in retrospect to have been more than faintly naive, or even slightly over-confident.
As the lack of traction continued, the problems mounted. Stores were opened and then closed. Stores were opened and then mothballed. Stores were built and then never opened at all. In the meantime, while some of the operational fixes were implemented, the basic lack of scale ensured that Fresh & Easy was likely to be on a hiding to nothing. The retailer’s infrastructure was built to handle over 1,000 busy stores, but ended up servicing just 200 quiet units. Akin to using several Exocet missiles to silence a boisterous chaffinch.
Tesco has stated that the capex invested in Fresh & Easy since its inception was around £1 billion, so Phil & Tel’s Excellent Adventure has not been the most expensive cross-border failure in retail, but it is certainly among the more humbling (although still some way to go to match Walmart in Germany which was epic). I’m sure that things would have turned out differently if financial meltdown had not occurred and Fresh & Easy had achieved the scale necessary to paper over some of the strategic and operational cracks.
In terms of what’s next, the likelihood seems to be a piecemeal sale of locations to the likes of Dollar General and Aldi. Talk of Walmart buying the chain, meanwhile, is fairly fanciful given the size of the stores and Walmart’s hesitancy in putting its foot on the accelerator for its Express concept. Not Tesco’s finest hour. But possibly not their worst either – they had equal unhappiness in France.
- Bryan Roberts, director of retail insights, Kantar Retail
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Comment: Not Tesco's finest hour, but possibly not its worst