Breaking News: Tesco's Fresh & Easy Considering Two Major Changes, One Physical the Other Design Oriented, to Increase Sales in its 100 Stores

Under a proposal it's considering, Tesco's Fresh & Easy Neighborhood Market would change the direction of the shelving in its stores from a verticle orientation, a shown in the photograph above, to a horizontal direction, changing the way the stores look and perhaps how they are shopped by customers.

Tesco's Fresh & Easy Neighborhood Market USA is considering making two major changes the retailer thinks will help to increase sales in its stores, along with boosting sales of its fresh & easy store brand grocery products.

The first change Fresh & Easy Neighborhood Market executives at the grocery chain's El Segundo, California corporate headquarters are considering is to completely change the direction and orientation of the grocery shelving gondola's in all of the retailer's 100 stores in Southern California, Nevada and Arizona, according to our sources, who Fresh & Easy headquarters employees have discussed the plans with.

The grocery shelving in all of the Fresh & Easy grocery and fresh foods markets is currently situated like is the case in the majority of U.S. supermarkets: the gondolas are oriented in a vertical way so that the end caps face the front and back of the stores and the grocery sections are shopped in a vertical or up and down way by shoppers.

Tesco's Fresh & Easy is considering flip flopping the grocery gondolas so that they would be oriented in the core of the store in a horizontal way, the compete opposite of how they currently are.

Instead of the vertical (or north-south) orientation with the end caps facing the front of the store, so to speak, the gondola's would face front, with the end caps to the sides. The grocery aisles would then take on a horizontal shopping modality rather than there current vertical orientation. The shelving in the Fresh & Easy stores is warehouse supermarket style. We use the term gondola in the broad sense to mean the entire shelving unit regardless of its particular style or look.

According to our sources, the primary reason Fresh & Easy is considering this major change, which not only would require lots of physical labor but a substantial cost as well, is because the retailer doesn't believe store customers are shopping the entire store. As a result of this the grocery chain believes shopper market basket sizes (total dollar purchases per shopping trip) are smaller than they should be.

At press time our sources said they believe Fresh & Easy is leaning towards making this major physical change in its stores, perhaps starting out with a couple stores first as a test and then seeing if it makes a difference in terms of encouraging shoppers to shop more of the store, and purchase more items, than currently is the case.

The discussion on the topic continues at Tesco's Fresh & Easy Neighborhood Market headquarters in El Segundo however, according to our sources, who said they haven't heard if the gondola change has been green lighted by CEO Tim Mason yet, as of today.

New fresh & easy store brand packaging design

The second major change Tesco's Fresh & Easy is working on is a redesign of its fresh & easy store brand grocery products line, according to supplier sources who have been informed of the possible or impending design and packaging change.

The packaging change doesn't include the grocery chain's fresh & easy brand ready-to-eat and ready-to-heat fresh, prepared foods lines, fresh produce or other store brand fresh foods, our sources said. Rather, the focus is on fresh & easy brand shelf-stable packaged goods items; those under the grocery department at the chain.

The first Fresh & Easy grocery market opened just a little bit more than one year ago in Hemet, California. About half of the current 100 Fresh & Easy stores have been open for less than five months. This means the current fresh & easy store brand grocery products packaging has been in the marketplace for a very short time. Therefore a packaging design change so soon has surprised many of the food and grocery companies that supply the products branded under the fresh & easy label to the grocer.

Many of these suppliers also aren't happy, especially if the design changes come soon. The reason for this is because the suppliers pay for the entire design process, printing and all related costs for the packaging of the products they supply to Tesco's Fresh & Easy under its fresh & easy store brand label.

The process essentially works like this: A Fresh & Easy Neighborhood Market product category manager works with two different packaging and art companies that Tesco uses, one for the retailer's fresh & easy brand fresh product lines and one for the shelf-stable fresh & easy brand lines. Tesco Fresh & Easy calls these ambient, preferring the British industry term shelf-stable, which tends to be used more commonly in the U.S.

The respective Tesco Fresh & Easy category manager and the contract packaging designer then come up with a suggested design and packaging after holding a series of meetings.

Once the design is decided upon by the category manager and approved by the director of grocery, the category manager goes back to the supplier and gives them the finished design and artwork that has been decided on for the product package. It is then up the supplier to execute the design using their own printer, materials and the like, paying for it as well.

Tesco does do all of the reproduction work though in-house, using a third party company it contracts with to do the work. The supplier pays for that cost as well though.

The suppliers have no direct input in terms of costing, sourcing and package design, except for the printer they utilize.

This system isn't unique to Tesco's Fresh & Easy in the U.S. But there are numerous variations done by other chains -- variations both in process and in costing.

For example, Trader Joe's, which has numerous store or private label brands, doesn't charge suppliers for the artwork. They also at times are more collaborative with suppliers in terms of the artwork design, letting them have major input. Suppliers have little or no input on the fresh & easy store brand labels, as is the case with other chains, while still others include the suppliers in the process.

The major reason many suppliers aren't looking forward to a redesign of the fresh & easy brand packaging anytime soon is because it's only been a short while ago that they paid for the design and related costs of the original packaging.

In most cases the short amount of time the stores have been open, along with the fact sales have been far less than what most of these suppliers were told they would be when they signed on with Tesco's Fresh & Easy, hasn't allowed for a payback or sufficient return on initial investment yet on the the original design and related costs.

Having to pay those design and related charges so soon again for a packaging redesign, especially in the midst of the current financial crisis and economic recession, isn't something these suppliers are looking forward to doing for obvious financial reasons.

According to our sources, the primary reason Tesco's Fresh & Easy wants to do the packaged goods category fresh & easy store brand packaging redesign, is a feeling among the retailer's new director of grocery merchandising that the packaging graphics and text need to be simpler and cleaner.

Two sources told us Fresh & Easy category managers have recently told them one of the objectives of the package redesign would be to make the new fresh & easy store brand packaging graphics and text look more basic, simpler and cleaner like it is on Trader Joe's various private label brands. The mention of Trader Joe's private label packaging isn't our usage, its from our sources' conversations with the Fresh & Easy category managers, according to those sources.

By changing the packaging Fresh & Easy hopes to gain increased sales of its fresh & easy store brand food and grocery packaged goods items, obviously.

However, depending on how the potentially new packaging graphics and text look, such a change also could be used from a positioning standpoint for the chain.

That's a tricky process though. And first Fresh & Easy needs to have a clear concept on what the stores' positioning actually is. That's not the case in our analysis.

For example, simple, basic and minimalistic yet attractive packaging graphics and text could be used to help position the stores more in the direction of value -- touting the value proposition, hammering it home daily, as we've suggested need be done.

On the other hand, too upscale of a look on the product packages could create a higher-end perception of the fresh & easy store brand in the minds of shoppers -- and thus create a higher-end perception of the stores. This is a perception the grocer does not want to create.

Such packaging also could further reinforce what we believe is a perception among many consumers that the Fresh & Easy stores are specialty foods stores rather than what Tesco wants them to be, neighborhood grocery markets with everyday low prices that consumers shop as their primary or at least secondary food and grocery shopping venue.

We don't know if a final decision has been made at Fresh & Easy headquarters to go forward with the store brand packaging redesign.

However, based on the number and qualitative discussions our sources say they have had with Fresh & Easy category managers, it appears highly probable the grocer is going forward with the redesign of its fresh & easy store brand packaged goods product lines across all of the shelf-stable categories.