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Demise of Tesco's Fresh & Easy: Was It the Economy Or the Brand…Or Something Else?

Some executives often are quick to blame a weak economy or consumers who are "set in their ways" rather than own up to their own failings.

Fresh and Easy Shortly after Tesco unveiled its Fresh & Easy Neighborhood Market small-format grocery stores in the U.S. market in 2007, Hartman Group analysts were there to carefully study and gauge consumers' response. Our conclusion at the time was that, for Tesco to achieve long-term success, it would have to overcome significant challenges. We questioned whether Tesco executives really understood the American consumer and the culture.

We believed then, and said it repeatedly in the following years, that Tesco had an innate desire—an arrogance if you will—to do things their way rather than make adjustments that catered to the needs and expectations of American shoppers. Despite Tesco's vaunted success in the European marketplace, the resulting retail experience in Fresh & Easy was artificial, sterile, and increasingly without a relevant proposition.

In 2007, then Tesco Chief Executive Terry Leahy said in a Wall Street Journal interview, "Our team went over to live in the U.S. We stayed in people's homes. We went through their fridges. We did all our research, and we're good at research."

Apparently, they are not as adept at reading consumers as they would like to believe. Despite all of the assorted research, dialogues, discussions and strategizing they may have had, Fresh & Easy required something more than an understanding of shopping behavior—what Tesco failed to understand is the importance of consumer culture.

Most recently, Tesco's CEO, Philip Clarke, speaking from Los Angeles on a conference call the first week of December 2012, described the banner's likely exit (and potential sale to "interested parties"). Mr. Clarke cited numerous reasons for shuttering Fresh & Easy: the economy, an overly slow path to acceptable ROI, and the fact that "It was a discount store and it had high costs and it just proved too difficult to shift people from their traditional buying habits in big supercentres and supermarkets into a small store."

These comments fly in the face of those retailers encountering the same set of factors but that manage to find pathways to success: Aldi, Trader Joe's, WaWa, Sheetz, not to mention Kroger and Safeway.

So, how could Tesco's Fresh & Easy format stores go down in the annals of history as one of the company's greatest failures when it originally was touted to revolutionize American grocery shopping?

It was as if an executive team engaged in a series of research projects that identified a variety of opportunity spaces, need gaps and consumer challenges (fresh? easy? convenient?) and then set out to design the idealized consumer experience that seemed to address these issues.

The fundamental flaw with the above perspective lies in the top-down approach. For even though this strategy may appear consumer-driven in theory, unless the consumer is accounted for at a foundational, organizational level — unless the consumer is allowed to drive and shape the experience — his/her impact is not truly being felt. And therein lies the dirty little secret of most successful retail brands: the retail experience of the most successful brands owes much more to the routine requests and tweaks suggested by its loyal customers than the powerful vision or insight of its executive team, much less solely that of the CEO.

Our research always points to one inescapable conclusion: food retailers, be they large or small, mass or specialty, are always a local thing. They're (quite literally) part of the fabric of the local community. This doesn't mean that broader, corporate strategies or initiatives can never be effective, but you have to nail down the local part before you can expect to be successful. Our own research demonstrates that there really is a white space for small format stores—especially when they maintain a more narrow focus on specific shopper desires.

Blaming Fresh & Easy's demise on a weak economy, slow ROI, and difficulty converting shoppers from large-format stores offers little explanation when compared with the success of retailers like Aldi, Trader Joe's, and innovators in the dollar and convenience channels. Instead, quite often, it is the decisions made in the boardroom where hypothetical consumer needs are summarized and mechanically solved.

Archives and past articles on Fresh & Easy

2012: Consumer Confidential: A Food Journal on Shopping Fresh & Easy

 

2010: Fresh & Easy: The Final Chapter

2009: Tesco’s Fresh & Easy Finally Comes Clean

2008: White Paper — Tesco's Fresh & Easy Neighborhood Market How fresh? Does easy matter?


2008: Missives and Musings on Fresh & Easy in America

2008: Food Retailing’s New Battleground: Small Format Stores

Categories

Retail/Shopper Insights Foodservice/Restaurant


FOOD SHOPPING IN AMERICA 2017

As leaders in the study of American food culture, The Hartman Group has been tracking how Americans shop for food since the 1990s. From one-stop shopping to multichannel shopping to online markets and click-and-collect, we continue to track consumers’ evolving perceptions, needs, habits and relationships with food retailers. New to the 2017 report is a special section on the expansion of the discount grocery channel, the emerging fresh-format channel and smaller-footprint retail formats.

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