Thursday, April 17, 2008

Vegas Baby!: Tesco Announces Ten More Fresh & Easy Grocery Stores For The Las Vegas Metro Region; it's All About 'Critical Mass'

As we've reported on Fresh & Easy Buzz in the past, Tesco's Fresh & Easy Neighborhood Market small-format, convenience-oriented grocery store venture in the Western USA, has been developing and planning to open far more than the current 11 Fresh & Easy grocery markets it currently has open in the Las Vegas, Nevada Metropolitan region in Nevada.

Today, Fresh & Easy announced it will open 10 new stores in the region. That's on top of the 11 existing grocery stores it currently has open in the area, and four new stores currently in the pipeline and set to open soon.

This brings the total number of confirmed Fresh & Easy grocery markets for Tesco in the Las Vegas Metro region to 25. There are more on the way as well, according to our sources.

The ten new Las Vegas Metro area stores will be located at the following locations (streets and cross streets):

(1) Charleston & Sloan, (2) Tropicana & Nellis, (3) Desert Inn & McLeod, (4) Lake Mead & Hollywood, (5) Las Vegas & Pecos, (6) Eastern & Wigwam, (7) Eastern & Fremont, (8)Vegas & Jones, (9) Vegas & Buffalo, (10) Las Vegas & Lake Mead

Readers familiar with the Las Vegas Metropolitan region (others can use Google Maps) will notice not only that some of these ten new store locations are fairly close together, but also that some of them are fairly close to existing Fresh & Easy Neighborhood Market grocery stores.

The Fresh & Easy 'critical mass' store location strategy

The reason for this fact is due to what we've termed Tesco's "critical mass" strategy of locating numerous Fresh & Easy grocery stores in selected regions--Southern California, the Metro Phoenix/Easy Valley region in Arizona, and Metropolitan Las Vegas, Nevada--fairly close together so as to eventually become what Walgreens' and Rite Aid are to drug store retailing and Starbucks is to coffee/cafe retailing--which in Fresh & Easy's case is becoming the "logical" choice for neighborhood grocery shopping. The "de facto" neighborhood grocer in other words because so many stores are located or concentrated in a given region.

In fact, we can now report that part of Tesco's longer-range Fresh & Easy grocery store "critical mass" retail location strategy is to eventually have the small-format, convenience-oriented basic grocery and fresh foods markets as close as within 1.5 miles from each other in these three respective markets, according to our sources.

The longer-range plan is to do the same in the Northern California regions of Sacramento and the San Francisco Bay Area, where Tesco will open an initial 37 grocery stores (19 in the Sacramento region, 18 in the Bay Area) beginning in early 2009.

Having a 25-store presence (and there are more new stores on the way for the region) in the Las Vegas Metropolitan region, which has a population of nearly 2 million people, could allow Tesco to start building a real grocery retailing critical mass in the area.

For example, radio advertising costs a retailer the same amount in a region if that grocer has just one store (or 11) as it does if that retailer has 25 stores. However, the cost vs. benefit of running those radio ads for a 25 store operation compared to 11 stores is significant.

It's called leverage. The potential store sales-lift from the radio ads are more than doubled overall when a chain has 25 stores in a region compared to say just 11, for example. However, the cost of the ads is the same. That's building marketing critical mass.

The same is the case with print advertising. Leverage, leverage, leverage.

Further, part of this "critical mass" retail store strategy--as Walgreens, Rite-Aide and Starbucks demonstrate--is that the sheer number of stores in a given area serves as its own best advertising. The medium (in this case the Fresh & Easy grocery store) is the message, as well as the retail venue.

Tesco knows this fact all to well since in its home market of the United Kingdom, the retailer has a store (or multiple stores) of one format or another in nearly every city and town in the nation. In fact, about the only part of the UK in which Tesco currently doesn't have any grocery stores are a handful of towns in the Scottish Islands.

The world's third largest, and the UK's number one, retailer solved that minor problem earlier this year when it bought a handful of stores from the UK's Somerfield supermarket chain, which is up for sale. Tesco bought eight stores from Somerfield, nearly all of which are located in those Scottish Isles towns where it currently doesn't have grocery stores--but soon will.

Vegas new store announcement well-timed

On the public relations front, making the new store announcement today--just two days after Tesco PLC reported its annual sales and profits, which were strong, and shortly after all the media attention (mostly negative) Fresh & Easy's three month new store opening "pause" has received, was smart and savvy of the retailer.

It should put an end to the suggestions by some that the new store opening hiatus meant Tesco was reevaluating opening any more new stores.

As we've reported on Fresh & Easy Buzz numerous times since we were the first U.S.-based publication to break the new store opening "pause" news after reading it in Fresh & Easy marketing director Simon Uwins' corporate blog, not opening more new stores was niether the reason for the three month hiatus, nor an issue debated by Tesco internally. As we keep saying: Fresh & Easy is a venture for Tesco, not a test.

None of this means Tesco still doesn't have numerous format, operations, marketing and merchandising problems with the small-format Fresh & Easy grocery stores that need addressing.

However, Fresh & Easy is becoming a bit more nimble in getting out in front of issues rather than waiting for others to define its retail brand and USA venture. There's more to do, but it's a good start.

Rolling the Vegas dice for fame and fortune

Meanwhile, with 25 stores and more to come, Tesco's Fresh & Easy Neighborhood Market--with a strong and creative marketing and advertising campaign, as well as making some key operations, format and merchandising changes like those we've suggested should be made for the last couple months here on F&E Buzz--has the opportunity to become a major food and grocery retailing player in the Las Vegas Metro region in Nevada.

And, as we all know, Vegas has been and is the home to some very major players, not just in grocery retailing by the way, but in general.

There's Frank (Sinatra), Sammy (Davis Jr.), Dino (Martin) and the rest of the Rat Pack, billionaire Howard Hughes and hotel magnate Steve Wynn, among the many others.

Many are asking the question: Will Tesco CEO Sir Terry Leahy go down in the annals of Vegas history and folklore like those mentioned above; in his case as being the region's major supermarket industry player and ultimately a Vegas legend?

Like they say...No guts, No glory. And...Vegas, Baby!...Vegas! Many come to Vegas to play big. Some win, some lose. But one thing they all have in common- and what leads them to sometimes gain that fame--is guts. Tesco is demonstrating it too has such grocery retailing guts with Fresh & Easy.

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