Tesco's Fresh & Easy Approach

Editor's Note Over the past two decades, there have been very few retail concepts that have received the publicity, analysis, and coverage that Tesco, the UK's largest retailer, has garnered with its long anticipated

April 6, 2018

Editor's Note

Over the past two decades, there have been very few retail concepts that have received the publicity, analysis, and coverage that Tesco, the UK's largest retailer, has garnered with its long anticipated entry into the United States this month.

Perhaps Carrefour's U.S. hypermarket debut in 1988 or Wal-Mart's supercenter launch that same year received similar fanfare and were touted as new formats that would change the face of the retailing industry. Wal-Mart's launch of Neighborhood Market in 1998 could be compared to Tesco's new format because it was positioned in a similar way as a convenient store to shop and an alternative to the big box. Neighborhood Market, however, although it has grown to 120 stores, never lived up to the original fanfare and growth projections.

So why is Tesco's Fresh & Easy Neighborhood Market format generating so much interest among retail and licensing execs, analysts, media, and consumers?

The answer is simple: This hybrid format has the potential to impact every

channel of retailing in the United States faster than any other concept that has been launched in more than 20 years. Fresh & Easy not only addresses the key challenges facing the world's retailers, including healthy and organic foods and eco-friendly policies, but it offers consumers convenience, value, and a viable shopping alterative.

Tesco's Fresh & Easy is the antithesis of the supercenter and warehouse club, which have been the dominant growth retail formats worldwide since the early 1990s. It offers a convenient 10,000-square-foot store vs. a 100,000- to 200,000-square-foot shopping environment; a wide assortment of fresh foods, prepared meals, and other convenience products; smaller sizes and portions; and the propensity for daily customer traffic vs. a weekly shopping trip.

In addition, Fresh & Easy will grow at a rapid pace with more than 30 stores planned this year and almost 100 more next year. And if Tesco fuels this growth through acquisition, as it has done in the UK and other countries, the number of Fresh & Easy stores will skyrocket. It's quite possible that there could be between 500 to 1,000 stores in a three- to five-year period or sooner. In the UK, Tesco currently has 546 Express stores, which average 3,000 square feet with 7,000 skus, and 160 Metro stores ranging from 7,000 to 15,000 square feet.

To put that into perspective, Fresh & Easy could quickly have more stores than the largest regional supermarket chains in the United States, including Ahold, Publix, Meijer, H.E. Butt, Wakefern (ShopRite), Winn-Dixie, and A&P; more stores than healthy food chains Whole Foods and Trader Joe's; and more stores than Long's, the fourth-largest drug chain in the country.

More than 120 locations have been announced-this month, six stores are opening in the Los Angeles area and eight in the Phoenix, Ariz., market, with 16 more to follow by year-end in other cities including Las Vegas and San Diego.

This potential scale and size will establish Fresh & Easy as a major player in the food/grocery retail channel in the United States and strengthen its global stature, resulting in some very powerful new brand, licensing, and merchandising opportunities.

While Tesco reportedly did its due diligence investigating the U.S. markets, consumer tastes, and shopping behaviors, several challenges persist. Without fuel, pharmacy, bakery or deli, can Fresh & Easy sustain daily traffic, establish customer loyalty, and build strong brand awareness? And will fickle Americans embrace its offerings?

The UK retailer's entry into the U.S. market could have a long-lasting impact on retail brand development, store size, product mix, and global expansion. Fresh & Easy may have garnered more publicity than most new retail concepts in the past two decades, but it's easy to understand why.

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