Posted on December 7, 2012
UK’s Tesco Just Didn’t Understand American Supermarket Shoppers
It’s amazing that a company with a $72 billion supermarket business in Europe and around the world could stumble so badly when they tried to open a chain of new supermarkets in the US. In today’s WSJ, I read the story of how Tesco is giving up its Fresh and Easy chain of small food stores after losing $1.6 billion in the past five years. It was really a matter of not understanding how Americans shop, and not noticing what they really liked about their food shopping experience.
One mistake was that Fresh & Easy never offered loyalty cards, like they do at Stop and Shop and Big Y, rewarding customers for spending money and collecting valuable marketing data at the same time. Tesco’s other mistake was that they opened all of their stores in California, Arizona and Nevada, which were where the most home foreclosures and economic hardship took place.
But it was deeper than just locations. The British, it seems, are keen on ready to eat meals, self service check-outs, and smaller stores–Fresh & Easy stores are one fifth the size of a normal US market. They also, like Trader Joes, offered mostly their own branded products, and Americans like name brands more than generics.
Locating stores in places where nearly every thing is a car-drive away was another mistake. It turned out people just kept driving right past Fresh & Easy to get to the stores with larger selections, customer loyalty rewards, and those name brands. A retail research director said in the story, “Was it a convenience store, or a discount store?”
Another casualty is nepotism–the chair of Fresh & Easy, Tim Mason, the son of the former CEO of Tesco, is resigning along with many other executives involved with the chain.