The world’s 3rd largest retailer, UK based Tesco, has been closing some of its “Fresh and Easy” stores in California this year. The Fresh and Easy chain was launched in 2007 with the goal to provide consumers with smaller neighborhood style stores with a variety of fresh organic and reaonably priced prepared meals.
So far Tesco have invested $2billion and opened more than 150 stores in California and are yet to break even.
No doubt Fresh & Easy has run into market obstacles, including California’s weak recovery from the recession but more importantly some of its merchandising practices (commonplace in Britain) have dumbfounded many American consumers.
For example, Fresh & Easy initially wrapped much of its produce in cellophane to preserve freshness. But skeptical U.S. shoppers — accustomed to examining their broccoli and lettuce up close — mistook the wrapping as a way to hide inferior products. American consumers assume produce in plastic bags is not as high quality as those in bulk. This led to an initial lower quality perception that has been hard to shake.
Adding to Tesco’s worries is the fact that many American consumers are conditioned to the idea that”big is better”. While smaller stores maybe more personal and convenient, Americans are used to driving distances to large retail warehouses (think Costco, Walmart etc) and often value bulk buying and competitive pricing over convenience.
There is also strong competition from revamped Safeway stores and the continued excellence displayed by Trader Joes and Wholefoods that really understand their customer base.
So where does this leave Fresh and Easy? They still have time to reposition themselves and find their place in the market but Tesco’s shareholders are getting impatience so they will need to find out what American consumers value most about their store’s value proposition and turn up the volume!
Similarly to Home Depot in an earlier post, Tesco should have started smaller and not ramped up until they knew they were hitting their sweet spot.
A culture that is customer centric, starts with the customer, understands what frustrates them about the current market offerings, builds a solution, tests it, then scales it.
Can Fresh and Easy survive?