Friday, December 7, 2012

Where Tesco Went Wrong?

 News broke this week that the British grocery giant Tesco is halting its original plan for expansion into the United States.  According to officials at Tesco, the expansion plans would go through a "review of options" because it's "delivering acceptable shareholder returns on an appropriate timeframe in its current form."

That current form is the Fresh & Easy brand.  Fresh & Easy is described as a small neighborhood market that sells fresh foods at affordable prices.  Tesco moved into the United States in 2007, opening its first Fresh & Easy store in Northern California and then expanded down the state and into Nevada and Arizona over the past five years.  The chain operates 199 stores.

I must disclose that I've never shopped at a Fresh & Easy store.  In fact, I've never even been within a thousand miles of a Fresh & Easy store.  Yet, a couple of things jump out to me where Tesco might have gone wrong with its United States expansion.

The first is the name.  Fresh & Easy is simply a terrible name.  While it may describe the brands' two principle attributes, it does so using two very forgettable and undefined cliches.  At least to the American consumer,  Fresh & Easy sounds like a brand name for kitty litter.  Tesco should have picked a more unique brand name not already in the American lexicon.

Secondly, Fresh & Easy's "neighborhood market" concept places it dangerously in the middle of the market.  Thus, Fresh & Easy is neither a full supermarket with a complete offering for your household and or a get-in-and-get-out convenience store.  Similarly, in the grocery category, there is competition at both ends of the market - from the higher end with Whole Foods and The Fresh Market and from the lower end with Wal-Mart, Safeway and Kroger.

Tesco was close in the United States but ultimately failed because they went where the competition already was.  With a little tighter focus, Tesco is close to developing a new category that they can dominate.  Instead of selling fresh foods traditionally, Tesco could be the first to exclusively sell fresh and already prepared food.  That's a niche that every supermarket currently dabbles in, but no one owns- at least not yet. 

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