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.