Thursday, May 22, 2008

New Regions New Markets: Tesco Will Open its First Fresh & Easy in Northern Nevada's Reno-Sparks Area

Tesco is coming to Sparks, Nevada in the northern part of the state, and will open a Fresh & Easy Neighborhood market grocery store, its first in the Reno-Sparks area, in the Silver State Plaza, a shopping center at Prater Way and McCarren Blvd., according to Dale Gillaspy, a city official with the Sparks Building Department.

The confirmation Tesco will open a Fresh & Easy grocery market in the shopping center by Mr. Gillaspry was reported in a small item in the Reno Gazette Journal newspaper and emailed to Fresh & Easy Buzz by a loyal reader in Reno, Nevada.

Sparks and Reno are bedroom communities in Northern Nevada and form a Metropolitan region.

Gillaspy also told the Reno Gazette Journal a new Office Supply big box store would be joining Fresh & Easy in the Silver State Plaza shopping center.

Fresh & Easy Buzz has known for sometime Tesco would locate some of its small-format, convenience-oriented Fresh & Easy grocery markets in the Reno-Sparks Metropolitan area for a couple of reasons.

First, the Las Vegas region in the southern part of the state is one of Tesco's three initial target markets for the combination basic grocery and fresh foods' format Fresh & Easy Neighborhood Market grocery chain. As such, logic dictates they would locate stores in the northern part of the state, since nearly all of Nevada's population is split between southern and northern Nevada, with very little in the middle.

Second, when we were one of the first to report last year Tesco would open 19 Fresh & Easy grocery stores in the Scaramento Metropolitan region in Northern California, our sources told us there were plans to open stores in the Reno-Sparks area as well. In terms of the retail grocery business, northern Nevada and the Sacramento region are part of the same market for statistical and market share purposes.

Additionally, when Tesco's Fresh & Easy Neighborhood Market announced/confirmed it would open the 19 stores in the Sacramento region some months after we first reported it, it made obvious the fact--in addition to Nevada being on of the grocer's three key markets--that the retailer would eventually start inking store site leases in northern Nevada.

We heard rumors about possible locations in Reno and Sparks over the last couple months, but since we didn't have confirmation we didn't write about it. The confirmation from Mr. Gillaspry is the first for a Reno-Sparks area store. Good work by the Reno Gazette Journal's "The Official Answer" columnist, which is the section of the paper where the item was ran.

Lastly, as we often discuss on Fresh & Easy Buzz, Tesco's store location strategy with its Fresh & Easy chain is what we call a "critical mass" store location strategy, meaning when you see the retailer planning to open stores in a given new region, such as the Sacramento market, the probability it will also go into neighboring markets like the Reno, Nevada Metro area is very high.

We are being told Tesco has at least two other locations currently in negotiation in the Reno-Sparks region of northern Nevada. However, until we get further confirmation we won't report those potential locations, as per our policy.

Interestingly, the item in the Reno Gazette Journal refers to Tesco's Fresh & Easy as a health food market, rather than what it is, a combination basic grocery and fresh foods store with an emphasis on everyday low prices.

We bring this up not to fault whomever wrote the item at the paper, there's no reason they should know exactly what type of grocery store Fresh & Easy is. Rather, we mention it because it just shows the perception problem the retailer has regarding its stores and how its been positioning(or not positioning) them, as we've written about a number of times.

As we've mentioned, in interviews with a couple hundred Fresh & Easy customers at and outside stores over the last five months, along with reading hundreds of online message board posts about Fresh & Easy, we've been told for example by the customers that before they went into one of the stores they thought they were gourmet food stores, British foods stores, natural or health food stores; nearly everything but what the Fresh & Easy stores actually are, as we described them above, which is essentially how Tesco wants them to be perceived.

And on the message boards, you can read comments by consumers who've yet to go into one of the stores thinking (and writing) the same things; suggesting Fresh & Easy stores are just like Trader Joe's (which they aren't although they have a number of similarities), British foods stores, stores that sell only prepared foods and other format misperceptions.

Much of this is due to a lack of clear format positioning by Tesco, which we believe has been part of the reason the stores aren't generating as much new consumer-shopper trial as they could.

It's also do in-part frankly to the hybrid nature of the Fresh & Easy stores. They are one-part small-format discount basic grocery store, one-part semi-upscale fresh foods markets and one-part organic and specialty food and wine store.

From a marketing standpoint, a hybrid retail format like Fresh & Easy is much more difficult to position in terms of marketing than say the small-format (SuperValu, Inc.) Sav-A-Lot chain, which is simple: A limited assortment of food and grocery products at the lowest possible prices; or Trader Joes: A specialty grocery store with domestic and imported private label specialty, natural and organic foods at low prices.

Making a one sentence positioning statement out of the Fresh & Easy format is a bit harder, so we can appreciate Tesco's struggle in that regard. One can create that one sentence positioning statement; we have. But the problem is it isn't simple, clean and short like those above for Sav-A-Lot and Trader Joe's. The cleaner and simpler a positioning statement, the easier it is to communicate and the better that communication is received by consumers.

This is because the Fresh & Easy format is a bit more complex and frankly a bit more muddled. That's not to say it's worse or better. But from a market positioning resultant communications campaign standpoint it poses more difficulties. In our analysis Tesco hasn't met that challenge yet. In fact, it hasn't come close to doing so.

If so, the consumer confusion--which by the way was in many ways created by Tesco's "British grocer comes to America" PR blitz for a year before the first stores even opened--wouldn't be so widespread as it is out there in Consumerland.

Tesco can do it, but the retailer needs to create a strategy, stick to it, and communicate it using more than press releases. It needs to create a positioning message and then control it by using paid advertising along with the PR campaign.

When a retailer has an identity problem--which we believe Fresh & Easy does have based on our analysis--it needs to control a major part of its own message by using advertising, be it radio, print, TV or a combination of all three. We suggest a combination of radio and selective print, as we've discussed in previous pieces on the blog.

In the meantime, locating stores in Reno-Sparks is a natural progression for Tesco, from Las Vegas, north to Nevada (the stae's two population centers), as well as being part of its long but rapid march from Southern California to Northern California (Sacramento and Reno-Sparks being in the same food retailing market).

Remember "critical mass." It means there will be more Fresh & Easy grocery stores to come in the Reno-Sparks area.

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