Tuesday, May 13, 2008

America's 'New Cult Retailer': Three Big Questions For Execution Research Ltd. About its Interview Study of Tesco's Fresh & Easy Store Customers

Execution Research Ltd., a boutique investment banking and research firm based in London, UK., with branch offices in New York and Hong Kong, has released the results of a study it conducted with what it says were interviews with 700 customers of Tesco's Fresh & Easy Neighborhood Market grocery stores in Southern California, Arizona and Nevada exclusively to the Financial Times newspaper.

The Financial Times published a story on the study results in its Monday, May 12 edition, which arrived in our email box early this morning.

A number of other publications, primarily UK-based, have picked up on the Financial Times' (FT) piece, basically reporting on what the FT reported on.

However, Execution Research hasn't issued a press release on the 700 consumer interview-based survey, nor has it made the actual study or a summary of it available online. Therefore the only data available is what the Financial Times has reported, which is minimal, and what the research firm has in its offices and computers.

The first three paragraphs of the Financial Times' story are as follows:

"Tesco's ambitious attempt to break into the U.S. grocery market with its Fresh & Easy convenience chain appears to be gaining traction with local shoppers, according to independent research conducted by the Financial Times.

Interviews with nearly 700 customers outside nine Fresh & Easy stores in Los Angeles, Las Vegas and Phoenix found a strong positive reaction to the chain. The interviews were carried out by Execution Research, a boutique research house with no corporate relationship with Tesco.

'Fresh & Easy is the new cult retailer' Execution wrote. At the risk of doing the job of Tesco's public relations department, F&E is already an incredible success story."

As you will see by clicking on the above link and reading the entire story, the piece is fairly short. There are only eight additional paragraphs after the three we reproduced above.

In the second of those additional eight paragraphs, the FT's reporters site this from Execution Research's report:

"The researchers found that customers who did visit Fresh & Easy liked what they saw. The chain was rated higher than Trader Joe's and Whole Foods on freshness of product, and it even managed to beat Wal-Mart on value for money."

What's strange about the Financial Times' report on the research interview study is that nowhere in the story are their any numbers. Nothing about what percentage of the 700 customers interviewed outside the stores said Fresh & Easy has fresher product than Trader Joe's and Whole Foods, nor how many say Fresh & Easy has better prices and offers superior value to Wal-Mart.

Nothing, Not a number. Not a percentage. Zero hard data. Not even soft data.

Nearly every report on consumer surveys and research studies published in the mainstream media--let alone in a prestiges financial publication like the FT--includes some sort of data or numbers, particularly percentages.

For example, do 98% of the 700 Fresh & Easy shoppers interviewed hold the opinion the stores offer fresher product than Whole Foods and Trader Joe's? Or is it 51%. Or 62%.

Further, what are the percentages in terms of shoppers who said Fresh & Easy beats Wal-Mart on price and value?

Inquiring minds need to know.

Execution Research is making three HUGE assertions in its study:

>That Tesco's "Fresh & Easy is the new cult retailer" in the U.S. Or, at least in Southern California, Arizona and Nevada where its stores are located. Regarding the term "retail cult," the word cult has very negative connotations in the U.S. As such, Tesco shouldn't be too pleased to see it used to refer to its Fresh & Easy stores, if you take a minute and think about it seriously.

>That the majority of 700 customers interviewed by the research firm rate Fresh & Easy's product as fresher than product from Trader Joe's and Whole Foods Market.

>That a majority of the 700 shoppers interviewed outside the Fresh & Easy stores say "Fresh & Easy beats out Wal-Mart in offering value for their money."

In fact, these aren't even huge assertions. If true, they are revolutionary.

Lets look at each of the three assertions briefly.

Tesco's Fresh & Easy as the 'new cult retailer'

Tesco opened its first Fresh & Easy grocery store a bit over six months ago in the city of Hemet, in the Southern California desert region. The retailer currently has 61 stores opened. About half of these stores have only been open for about three months; the other half for no more than five months, give or take.

This means if the Execution Research study is correct, Tesco has managed to become the "new cult retailer" in the U.S. by opening and operating 61 stores, half of which have only been open for three months.

No other retailer in America has achieved this. In fact, other than Trader Joe's, Whole Foods and perhaps gourmet retailer Dean & Delucca, its hard to name any other "cult retailer" in the United States. Maybe Costco, but that's questionable. Wal-Mart is many things, but it's not a "cult retailer."

Having watched the beginnings and evolution of Trader Joe's and Whole Foods since day one, when Joe Coloumbe (Trader Joe's founder) and John Mackey (Whole Foods founder) turned the keys in the doors of their first respective stores, Fresh & Easy Buzz can tell you it took both chains a good decade before each of them even began to approach "mini-cult" status.

According to Execution Research, Tesco's Fresh & Easy has achieved this designation in a mere six months. And its done so by operating in only three Western U.S. markets--Southern California, the Metropolitan Las Vegas/East Valley region in Arizona, and the Las Vegas, Nevada Metropolitan area.

Not even Tesco's Fresh & Easy marketing team, who's job it is to tout the grocery chain, has made any assertions that even approach claiming the grocer is the "new cult retailer" in the U.S.

Fresh & Easy product fresher than Trader Joe's and Whole Foods

This is another major assertion. We happen to know a little about Whole Foods' fresh foods' procurement system and supply chain, and "freshness" is generally the system's first, second and third priorities.

Regarding Trader Joe's, it too has a stellar reputation for product freshness.

We aren't saying Fresh & Easy doesn't have as fresh--or even fresher product. (In fact, we are impressed with many of the retailer's fresh foods offerings.) Rather, merely that this is a bold assertion by the researcher which needs to be backed up with some data. If the study was saying Whole Foods or Trader Joe's had these superior attributes, we would asking the very same questions.

Fresh & Easy better value for shoppers' money

The data from the interviews could very well demonstrate the majority of the 700 customers interviewed outside the stores said Tesco's Fresh & Easy offers them better value for their money than Wal-Mart does. But show us the data.

Research isn't an act of faith, it's a scientific-based enterprise. Bold assertions made in the name of having a research study to back it up put the burden of proof on demonstrating such conclusions with numbers on the person or organization making such assertions.

Any trained researcher reading the Financial Times' (it's all there is since the researcher hasn't released anything to others) piece would be justified to believe its all just make believe. There's not one number, data point or percentage regarding the study. After all, Faith is a wonderful name for a girl, and hope is a great political slogan, but analysts and good consumers of research studies like data.

Nor is there any mention of the study's methodology in the FT's story, which makes us question whether the research firm shared any with the reporters. Nearly every newspaper report on a survey or study at least takes a single paragraph to mention the study's methodology. Other than the sample size and the information about the nine stores, we know nothing about the methodology.

The report says Execution Research interviewed 700 shoppers outside of nine Fresh & Easy stores in each of the regions where the stores are located. That's not a bad sampling at all. But, what type of questions did the researchers ask the customers? Did they use a questionnaire form and then tabulate it? Or did the researchers just ask questions but not write anything down?

In other words, what was the study's methodology? It's protocol? How did the researchers tabulate the data? Was there data? Did they really include all the responses in the interviews, or just the positive ones?

This lack of data leads to questions and speculation, especially when such bold assertions and conclusions as those the Financial Times is reporting were made to its reporters by Executive Research, based on its study results.

Therefore, we have three simple questions that as experienced researchers and analysts we would like to ask Executive Research about its Fresh & Easy consumer study and interviews. If these questions aren't answered, we suggest the research cannot be properly evaluated. Therefore, it's essentially worthless. If these questions are answered, and it's a real, quality, unbiased study, Fresh & Easy Buzz will sing the praises of the results in multiple stories.

Three Questions For Execution Research

>Will you publish your study and its results online so analysts, consumers and others can read it for ourselves and make our own judgements? Additionally, so we are able to see, read and study the data that's not available in the Financial Times' story?

>Was the research funded in-house by you, Execution Research Ltd., or was it funded by a client or other third party? If it was funded by a client or other third party, does that client or third party have any business relationships with or financial investments in Tesco PLC.?

Nearly every study done by companies, retailers and trade groups disclose who funded a given study as a matter of practice and professional behavior.

For example, what if the results of a survey were published that said Safeway's O' Organics brand food products were "fresher" by a significant factor than Trader Joe's, Whole Foods' and Fresh & Easy's store brand organic items are? Wouldn't everyone want to know who funded the study?

>What form of research methodology and practice did you use to arrive at the estimates, quoted from you and your report in the Financial Times' story, that "the sales densities (sales per square foot) at Fresh & Easy stores sampled were running at $6 -to- $12, with sales at some of the best stores already clocking up $12."

Even as experienced researchers it's difficult to understand how an intercept consumer or store observational research methodology could allow one to make these sales density estimates.

One could post researchers in the stores for a given period of time (say 2 hours in the morning, 2 hours in the afternoon and 2 hours in the evening), have them observe each ring at the cash register and write it down, and then use that cumulative data from all nine stores to derive a crude estimate of sales per square foot we suppose. But that isn't easy, and somehow we doubt that's what was done. It not only would be helpful to know, but interesting to learn what type of methodology you used in general.


Therefore, knowing this information, along with obtaining answers to questions number 1 and number 2 above, would allow experienced analysts and researchers, as well as consumers, to better understand the basis for what on the face of it appears to be not only excellent but revolutionary news for Tesco's Fresh & Easy Neighborhood Market in the U.S.

However, absent such data--at least some percentages, numbers, stuff of reality--it makes it hard for professionals to take the research report seriously.

We look forward to seeing the study posted online, and getting the answers to all three questions--as we know the many Fresh & Easy Buzz readers, along with consumers and others will as well. Thank you.

Editor's Note: Fresh & Easy Buzz wants to make it perfectly clear, as this piece states, that all of the questions, as well as the piece itself, are addressed to Execution Research regarding it's study of Tesco's Fresh & Easy grocery stores.

The piece and the questions are not addressed to Tesco PLC or its Fresh & Easy Neighborhood Market division, which to our knowledge didn't participate in or fund the study in any way, shape or form. Further, the piece and the questions aren't addressed to the Financial Times. The publication has the right, which we respect, to publish any story in any way that meets its editorial standards, just as we have the right to suggest including more about the study in their story would have illuminated the findings better in our opinion.


OakMonster said...

Heck, I jokingly call F&E a cult too. As I try to convert my friends to get to their nearest stores to test it out. My "Temple of Fresh & Easy" blog is a testament to that.

It beats Trader Joe's on the crowd, that's for sure.

wár17 § said...

1. Why is Fresh and Easy a cult when there are few shoppers shopping there? There are never more than 10 or 20 shoppers at a store at one time. During the same period, Whole Foods and Trader Joe's stores have 50 to 100 shoppers.

2. No one sells fresh as much as Whole Foods. Shoppers pay a premium for that freshness at Whole Foods.

3. Fresh and Easy gives out $5 coupons often every week. They also discount their prices by 50% when items are due to expire. With these discounts, F&E could be lower than Walmart.

Anonymous said...

Great post.

Although I believe of all 3 retailers Trader Joe's does the best job, their biggest weakness is their produce. For me, good produce and freshness go hand in hand and I could believe that other retailers have "fresher" produce.

Fresh & Easy Buzz said...

It would be nice to know the questions the research firm asked the customers in terms of how to arrive at which grocer has the "freshess" produce, wouldn't it?

A "study" like this without any data published to back it up is merely an opinion.

This is why we have these THREE questions for Executive Research Ltd. about their study and the results they gave to the Financial Times.

Fresh & Easy Buzz hasn't heard anything from the research firm yet; nor have we seen either the study published or even a summary of it published to date.

We've received a few emails asking us if we have; so wanted to respond here.