Nearly four years ago we viewed the new concept on the North American retail scene Tesco’s Fresh & Easy Neighborhood Market. Sir Terry Leahy once told us that Tesco had identified a “gap in the market”; he’d just didn’t know if there would be a “market in the gap”.
Those first stores in Los Angeles and Las Vegas were very different to anything we’d seen across Tesco’s global activity. However, while there was considerable novelty, ingenuity and innovation, we also felt that they were cold, clinical and arguably sterile.
Given the muted start and substantially larger losses than originally anticipated, it would appear that the first assessment of the West Coast shopper was that a market in the gap there wasn’t. US shoppers are used to large fresh food displays, vouchers, coupons and flyers and big brands; as we have seen recently in an everyday supermarket like Ralph’s.
Tesco is nothing but tenacious, however, and so having read of initiatives designed to make the stores more competitive, we visited ‘LA LA land’ to see remodelled shops at Alhambra, Burbank and Manhattan Beach. There has been an enormous progression in the offer and the stores are certainly not sterile anymore. Tim Mason and his team have worked on every yard of space to good effect.
The stores are colourful, warm and accentuate Fresh & Easy’s points of difference, especially vertical integration & high food standards no artificial flavours, colours and so on. Shoppers are met by fresh flowers & fresh artisanal bread, with a bake-off unit along the back wall. Gondola ends are magnificent note Tesco UK with sports bars, vitamins & supplements and fresh coffee, while category management has advanced leaps & bounds, as have exclusive sub-brands such as Eat Well, Goodness, and Gourmet. Stores in Bakersfield are also trialling a new web-based Friends loyalty card.
Encouragingly, with like-for-like sales of 10%+, American shoppers seem to like what it is happening. It is too early to say whether or not Fresh & Easy will fulfil Tesco’s initial ambitions, but it has changed for the better, and maybe that market is there after all.
And so we feel much more confident that losses will disappear within two years and that the business can contribute to the group’s financial performance.