Wednesday, March 19, 2008

Vox Populi!: The People Speak Out on Tesco's Fresh & Easy Grocery Stores on the 'Fast Foods Maven's' Blog: We Analyze the Data and Offer Results

Nancy Luna, a business reporter for the Orange County Register in Orange County, California, who also writes a food-oriented blog in the paper called the Fast Food Maven, wrote a blog post yesterday about Fresh & Easy's announcement that the grocer will now accept American Express Cards (they didn't before for some reason) in addition to the other credit cards it takes in its 59 stores in Southern California, Arizona and Nevada. [Note to Raphael: The other credit cards the retailer takes are Visa, MasterCard and Discover Card, according to the manager at the Anaheim, California Fresh & Easy store.]

At the end of her blog post yesterday, Luna asked the newspaper's readers a question: 'What would you like Tesco (Fresh & Easy) to do next to win your shopping dollars' She also opened the comments box to their opinions of the stores by virtue of the question.

As of this evening, there are ten total responses (and comments) to Ms Luna's reader question. Bu, as you will see below, we're only using seven of them because one is a response from blogger Luna, another respondent posted twice, and a third comment is just informational.

Below are the (screen) names of the reader's who have responded thus far. Next to the names we score their comments and opinions as either positive, negative or neutral, regarding Fresh & Easy Neighborhood Market stores where they have shopped. Remember, only 7 opinions are valid, which is why we are using that number. Here we go:

The People's Opinions::

  1. A V Rabinowitz: Positive, Very pleased about F&E now taking Am-Ex. No other store comments though.
  2. Go Ducks: Neutral, leaning towards negative. Says F& E needs to do a better job on nutrition items on the prepared foods items. Wants more low-fat and healthy items. Says F&E can "do a better job."
  3. Troy: Negative; No love for F&E from Troy
  4. Nancy Luna: Not Scored; She's the blog writer commenting on a comment.
  5. Mike: Positive; especially on the prices.
  6. Kimberly: Positive; likes the samples, wide aisles, store employees, the free $5 coupons for purchases of $20.00 or more (there goes the gross margin).
  7. Dennis Roberts: Positive; Also likes the $5 coupons (guess so, that's 25% off a $20 order), likes the store brand products, wonders why the store doesn't have more business.
  8. Raphael: Not Scored; just wants to know if Fresh & Easy takes credit cards other than Am-Ex. Since nobody answered him on the blog: Yes they do Raphael. See our first paragraph above.
  9. Troy (second post): Negative Says he works at Disneyland. Was not pleased with the sample hostess last time he was in F&E. (We are only counting Troy once, by the way.)
  10. Dawn: Negative: Doesn't sound like she will be going back to Fresh & Easy.
The Raw Numbers (as of March 19):

Total Comments: 10 in total but 7 usable comments:
We are only counting Troy once. His opinion is the same in both posts. We aren't counting Nancy Luna as she is the blog writer. We are not counting Raphael as he was just asking about credit cards and has no opinion. Thus there are 7 actual comments.

Consumer Opinion Ratings of Fresh & Easy:

  1. Positive Comments: 3
  2. Negative Comments: 3
  3. Neutral comments: 1
  4. Not Scored: 2
  5. Duplicate Comment: 1 (Troy)

Based on our scoring system, it's a dead heat thus far between the Positive and Negative opinions of the Fast Food Maven blog's readers. There is one neutral comment. We scored it neutral leaning towards negative. However, it goes in the neutral column as it fits that category more than it does negative in our analysis.

Based on the universe of seven opinions (a small but real universe none the less) Tesco's Fresh & Easy gets about a 45% approval rating and a 45% disapproval rating. Further, since Go Ducks is leaning towards negative (we made a fair judgement call) that brings down the 45% F&E approval rating a bit (also in all fairness). But we will call that qualitative. The 45-45 still stands.

Since blog posts have a long life, these stats could change either way. Like professional polls, online opinions are merely a snapshot of a particular point in time. Remember, however, these seven people are consumers. They also have family, friends co-workers and the like, who they will tell what they think of Fresh & Easy based on their opinions stated here. Also remember: word of mouth marketing is perhaps the most powerful--in both positive and negative ways. [Read the blog post and the comments of "the people" here.]

In terms of the positives, we can't help but commenting that two of the three sited the free $5 off coupons on grocery orders of $20 or more as a key reason for "liking" Fresh & Easy. Our understanding is that these coupons (Tesco calls them vouchers in the UK) are given to shoppers in the stores and sometimes placed in the Fresh & Easy Neighborhood Market mass-mailed advertising circular.

We think the latter is probably a good idea. The former has some merit in terms of serving as a reinforcement or loyalty-type marketing strategy--but its utility is minimal in our experience and opinion. The ad circular-placed $5 off coupons can at least serve to generate new customer trail, which Fresh & Easy needs to do.

Five dollars off a $20 grocery purchase is a good deal for shoppers. If their order is only $20, that's over 25% off the grocery order. Of course, Tesco hopes the order will be $50, so that its only a 10% discount. Even if the average order is say $30 though, that's still a 15% discount.

A $5 coupon on a minimum $20 order isn't something the grocer--any grocer--can sustain for too long though, unless it's a non-profit. Even if Tesco is obtaining a 40% overall gross-margin (which we doubt) in its Fresh & Easy stores, the use of lots of the $5-off on minimum $20 order coupons are a major gross margin suppressor. However, right now the coupons can be chalked up to a marketing expense (and maybe budget line item); a way to drive shoppers to the stores and to keep those who have shopped the stores coming back...for a while.

Of course, the proof will be in the pudding--which is the case for all price promotions with all retailers--when Tesco stops distributing the coupons. In other words, what percentage of customers are just shopping the stores for the significant coupon discount? That's the 64 thousand dollar question. And, it's too early to know that yet.

No comments: