Tuesday, April 1, 2008

Supermarket News' Fresh & Easy Cover Story: Industry Analysts and Others Agree With Our Multi-Month Argument That Fresh & Easy Stores Need Local Focus

The cover story of This week's Supermarket News, a supermarket and grocery industry trade publication, is titled: "Fixing Fresh & Easy." The cover story discusses what various supermarket industry analysts and others believe might be some changes Tesco will make in its Fresh & Easy Neighborhood Market small-format, hybrid basic grocery and fresh foods grocery markets.

The top-two speculated upon or suggested changes quoted in the report are:

>"Tailoring the (Fresh & Easy store) offering better" to individual neighborhoods where the Fresh & Easy stores are located.

>Creating more awareness through advertising

In fact, the headline of the report in today's Supermarket News' online addition is: "Analysts See Need For Tailored Offering at Fresh & Easy."

Local and Neighborhood Focus Customization

Bingo: As our readers know, Fresh & Easy Buzz has been the 'local neighborhood focus, custom-tailored offering' evangelist among industry publications, suggesting and arguing the number-one change Tesco needs to make with it's Fresh & Easy convenience-oriented grocery markets is to better localize and custom-tailor the store format, operations, marketing, merchandising and product selections to the neighborhoods the stores are located in. [Look through are archives, as well as clicking the links above and elsewhere we've provided for you, and you will find dozens of pieces and stores where the importance of this "localism" is mentioned and discussed.]

We've also evangelized on the local neighborhood/custom-tailored offering topic further, suggesting Tesco needs to better understand (and respect) the history, culture and demographics of each store neighborhood in order to tailor the store offerings to that respective neighborhood if the grocer wants to succeed in the highly-competitive markets it has entered.

We weren't interviewed for the Supermarket News cover story; nor did we want to be. However, we do know that some of those who were interviewed for the story read Fresh & Easy Buzz. Since our Google and Yahoo searches haven't found many (really any to be honest) other analysts, industry professionals and writers arguing the importance of the local angle vis-a-vis Fresh & Easy, we say..."It's good to be read."

Further, in this seperate editorial commentary piece, Supermarket News editor David Orgel emphasises the local neighborhood store customization factor, which we've been pointing out for about four months in opur analysis, is a serious problem for Tesco and one of the reasons for the sales under-performance of the Fresh & Easy stores to date.


We've also been about the only analyst we can find who has talked about the serious need for Tesco to create awareness of the Fresh & Easy grocery stores via an advertising program, rather than relying completely on public relations-driven "free media," which the grocery chain has done to date. Media marketing is excellent. But it's not a substitute for advertising, especially in the case of a retail start-up.

As we wrote in this analysis piece titled, "Fresh & Easy @ 50 (Stores): An Analysis and Some Suggestions For Going Forward," our suggestion to Tesco is to launch targeted radio advertising campaigns for its Fresh & Easy grocery markets. Why radio? For three main reasons:

First, the regions where Tesco has its 59 Fresh & Easy grocery stores to date--Southern California, the Phoenix, Arizona/East Valley Metropolitan area, and the Las Vegas, Nevada Metro region, all happen to be excellent radio advertising markets. One key reason all three market regions are excellent radio markets is because they're commuter regions. People spend hours in their cars commuting to and from work, along with driving to other business-related and leisure outings, and as a result are captive audiences for radio advertisers. These regions are dominated by the automobile.

Second, (and in conjunction with the first reason) radio is a great medium for target marketing. For example, in Southern California Tesco can run radio spots in just Orange County, just in the Inland Empire region, or just in the San Diego area, rather than in the entire Southern California region. Or, a marketer can run radio ads in the entire Southern California region all at once. It all depends on the strategy. And, a marketer can turn them on in one region, off in another--and analyze the results without wasting lots of money.

Lastly, (combined with one and two above) radio ads are super cost-effective. Radio makes multiple-impressions but doesn't come close to the cost of television or even print (cost per-impression) in most cases. Right now, radio advertising rates are very competitive because of the economic downturn in the U.S. This is especially the case with radio advertising in California, Arizona and Nevada, which are three of the hardest hit state economies in the nation.

The radio ad campaign needs to be done in conjunction (integrated) with a good PR-oriented marketing communications program ("free media"), smart and creative in-store promotions, the weekly product advertising circular, and aggressive and meaningful community relations programs.

By integrating all these elements, and doing it well, Tesco will find the consumer awareness factor of the Fresh & Easy stores will zoom.

And the beauty of it all is, because Fresh & Easy is following what we call a "critical mass" retail strategy (locating numerous stores close together in a region similar to the Starbucks model) , an integrated marketing campaign--with radio as the lead horse--like we describe above can be done for such a reasonable cost, that Tesco brass in the UK might wonder why Fresh & Easy's marketing budget is so low. It's all in the plan, creativity and implementation.


We've been pointing out that two of the key reasons the 59 Fresh & Easy small-format grocery stores have been seriously under-performing vis-a-vis Tesco's weekly sales targets (our estimate of weekly per-store sales of $60,000 -to- $100,000, compared to Tesco's target of $200,000) are (1) a lack of focus on localizing the stores and their product mix to the respective neighborhoods the stores are in,and (2) a general lack of awareness among consumers that the Fresh & Easy markets even exist in their areas.

It's nice to have a number of other analysts and others join us.

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