Pictured above is the Fresh & Easy Neighborhood Market store on famous Hollywood Boulevard, in Hollywood, California. The Fresh & Easy market is nearby the Kodak Theatre, where the annual star-filled Academy Awards show, also called the Oscars, will take place tomorrow night. The envelope please: It's now about 15 months since the fist batch of Fresh & Easy stores opened. Will Tesco Fresh & Easy Neighborhood Market CEO Tim Mason be able to make the small-format, convenience-oriented grocery and fresh foods chain a "star?"In a brief story to be published in tomorrow's Sunday London Times, Tesco Fresh & Easy Neighborhood Market CEO Tim Mason and the Southern California-based grocery and fresh foods chain's chief marketing director, Simon Uwins, tell the Sunday Times' William Kay that the retailer's "extensive" market research in the Western U.S. market regions of California, Nevada and Arizona, research Tesco has been touting as top-flight and comprehensive for over two years, was wrong and mistaken.
"We may have assumed that certain elements of the Fresh & Easy brand would do the work for us and we would not have to go down and dirty on price. That may have been a mistake," Tim Mason, CEO of Tesco's Fresh & Easy Neighborhood Market USA, is quoted as saying in the report.
It not just about getting "down and dirty" on price though, although that's a reality in the current deep economic recession. It's all about creating a comprehensive Fresh & Easy format rather than the current muddled format, placing value at the center of that comprehensive format and then communicating it in a clear and regular way to consumers, as we've been suggesting the grocer needs to do since we started Fresh & Easy Buzz.
We reprint the full Sunday Times' report below (in italics):
Tesco admits: We got it wrong in US
February 22, 2009
The Sunday Times
By William Kay, Los Angeles
THE head of Tesco’s US operation, Fresh & Easy, has said its early market research was mistaken and it may make big changes to the stores.
“We may have assumed that certain elements of the Fresh & Easy brand would do the work for us and we would not have to go down and dirty on price. That may have been a mistake,” said Tim Mason, head of Tesco’s US business.
Ahead of Fresh & Easy’s launch in November 2007, Mason trumpeted the in-depth research that was done to identify a gap in the West Coast grocery market.
Marketing director Simon Uwins said: “We went into people’s houses, talked to them about food and food shopping. We went into their kitchens and poked round pantries.”
Unfortunately, Mason now admits, they did not poke around their garages, where they would have found huge freezer chests bulging with stockpiled meat bought on special offer.
“There’s less loyalty in the American market,” said Mason. “A Brit has to hear it a few times before you accept that people make up their mind where to go each week when they check out the special offers round the kitchen table.
“In a key moment at a focus group, one man told them that he had stopped shopping at Fresh & Easy because they no longer sent him a flier promoting the latest special offers.
“We came out of that meeting and said we had better make sure we hit everyone in the area with fliers.”
Recession has slowed expansion. There are 113 Fresh & Easy outlets and plans to have 200 branches have been put back at least six months. [Here is a link to the story as well.]
Analysis: Tesco Fresh & Easy CEO Tim Mason takes a page right out of Fresh & Easy Buzz
Mr. Mason's comments and quotes should sound rather familiar to regular readers of Fresh & Easy Buzz.
For over a year we've been writing and offering analysis in numerous pieces that Tesco's "extensive" pre-Fresh & Easy launch research was questionable, since the grocer failed to discover so many basic aspects and practices of how food and grocery retailing in America works.
These research failures include such simple basics as how Americans prefer fresh, bulk produce over pre-packaged, to (a major Fresh & Easy Buzz theme) the regional, sub-regional, sub-sub regional and local nature of grocery retailing in the U.S. -- that there are regional markets like the Western U.S., then sub-regional markets within those which have extensive differences, like California, Nevada and Arizona, then additional sub-sub regional markets within those, such as Southern, Central and Northern California, and then even local markets within those sub-sub regional ones, right on down to the neighborhood level. There are niches within the niches. Just ask Safeway Stores, Inc. what it discovered when it finally started taking its neighborhood merchandising-marketing program seriously in the late 1990's.
We've suggested that despite the research being bad, something Mr. Mason has only admitted now, such things happen, but that Tesco's Fresh & Easy should have admitted it long ago and then course corrected. It has started doing a bit of that course correcting of late, including taking our advice in terms of beginning to build a better value proposition. But it is nearly a year too late in doing so, as we've written previously.
Another major theme in all of our writing and analysis has been that's what lacking with Fresh & Easy's merchandising, marketing and operations is the creation of a value proposition and then the communication of that proposition in a clear, concise and repetitive manner. It appears our argument has now found receptive ears.
By value proposition we of course mean discount pricing, both everyday and promotional -- after all from day one Tesco claimed Fresh & Easy was and is about 15% cheaper everyday than its food retailing competitors stores are, which hasn't tuned out to be true based on our research -- but not just discount pricing. Value is much more than that. Value is appealing to consumers on multi-levels, and it must include their pocket books. It's Convincing them your offering provides the best value for the best price.
As we frequently suggest, for Tesco's Fresh & Easy,that value proposition needs to be the hub of its wheel, with all of its other offerings -- prepared foods, natural and specialty foods, specialty wines, ect. -- then being the spokes of that hub and wheel.
Based on our extensive research, which has included talking to numerous past Tesco Fresh & Easy employees, it's, as we've previously reported and discuss in the Blog, our analysis that what Tesco has done to date with Fresh & Easy is essentially assume it could force-feed its model of British food and grocery retailing into the Western U.S. and convince consumers that they would prefer it to what they are used to and like -- food retailing Western USA style, which means appealing to the consumer and focusing locally like a laser beam on the communities and neighborhoods served.
The U.S. is a decentralized (there really is no national chain, Wal-Mart comes the closest to being one), super-competitive, multi-format food retailing market. And unlike the United Kingdom, regional supermarket chains and independents are a key and significant force in U.S. grocery retailing.
In California alone there are numerous multi-billion dollar, privately-held chains that are top market share players in their sub-market regions. These include Stater Bros. (about $4 billion in annual sales) in Southern California's Inland Empire region, Bashas (about 3.4 billion in annual sales) in Arizona, and Raley's (about $3.6 billion in annual sales) and Save Mart (about $6.5 billion annual sales) in regional markets in Northern California.
There are a few others over the billion dollar annual sales mark as well, along with many multi-store independents approaching a billion dollars in annual sales, and even more in the hundreds of millions and high tens of millions in annual sales.
Then there's the really big guys -- Wal-Mart, Costco, Target, Safeway, Kroger Co., Supervalue, (and many more), along with the big niche players -- Trader Joe's (about $5 billion), Whole Foods Market (about $6 billion) (and numerous medium and smaller niche players too) -- and the ethnic grocers (particularly Latino consumer-focused food retailers) in California, Nevada and Arizona).
Did we forget to mention the legions of high-volume single store independent grocers in the U.S.? And California is one of the strongest single-store independent markets in the nation, as one example.
And let's not forget the mega-drug chains like Walgreens, CVS-Long's and Rite-Aid, all of which increasingly are offering and discount promoting more and more food and grocery items. For example, this weeks 12-page advertising circular from Walgreens, the largest U.S. drug store chain (maybe should change the name to Walgreen's drug & grocery) looks more like a supermarket ad circular -- about 60% of the items are groceries, including dairy and deli items -- than a traditional drug chain (or Walgreens') advertising piece.
We aren't sure if this "British food-grocery retailing model "force-feeding" approach by Tesco has been because of pure hubris, which is something former and present company employees have suggested to use is the reason. But whatever the reason, in our analysis its been in many ways "Ted Mack time" (an important American pop culture reference to know) by Fresh & Easy's leaders thus far for Tesco, which is one of the best overall global retailer's in the business.
[If you do a search in the "search box" at the top of Fresh & Easy Buzz -- use words like "value proposition," "localism," "research" -- as well as looking through the Blog archives (even better) -- you will find that Mr. Mason's revelation in the Sunday Times' piece mirrors our analysis, arguments and suggestions rather closely in terms of where Tesco's Fresh & Easy has gone thus far -- and where it needs to go.]
It is said that admitting mistakes is the first step towards correcting them. We hope that's the case for Tesco's Fresh & Easy, especially because the grocer has some of the finest and most dedicated store-level employees in the business.
It's also important to note that unlike Tim Mason, many CEO's will never admit, particularly in print, that they "got it wrong." Instead, they would rather go down with the ship still saying they were right; that the environment was just wrong. For example, look how long it has taken General Motors' CEO Rick Waggoner to admit GM "got it wrong." And the timing was pretty close to the company's asking for billions of dollars in loans from the U.S. government, at that. Therefore we give Mr. Mason credit for having the confidence and wisdom to say what he said.
But the fact that Mr. Mason is admitting the grocer "got it wrong" should also shed some light on just how serious (as in not so positive) Tesco's struggles with Fresh & Easy are. Keep in mind Tesco will soon report its financials, including those at Fresh & Easy Neighborhood Market USA.
We have seen some positive signs in recent weeks in terms of changes in Fresh & Easy's merchandising and marketing. Of particular note appears to be the movement, albeit in baby steps, by the grocery chain more towards the value proposition-based model we've long been suggesting it needs to do. On the item side of this equation these developments include the introduction of what Fresh & Easy calls its 98-cent value produce packs. It also includes the addition of more nationally branded grocery products into the stores.
Fresh & Easy also has been sharpening its promotional pricing -- offering better deals -- and improving its in-store merchandising, particularly in the grocery category.
For example, when we visited a number of stores between the 2008 Thanksgiving and Christmas holidays we noticed pre-pack shippers being tastefully used in the stores. Prior to that Fresh & Easy had a "clean floor" policy, in which it didn't allow shippers on the store floor. The shippers we viewed then were all featured national brands, which is a good idea for the grocer because it helps augment the primarily store brand (about 60%) model and focus in the stores. The shippers, many of which contained items with a higher ring but were price-discounted well, also help increase market basket size for the stores.
We also saw an end-cap display we liked. It featured a number of well merchandised fresh & easy store brand grocery items. On the display were stacks of paper Post-It Notes, along with a sign that basically said: "Take a Post-It Note, write-down your favorite fresh & easy brand items and stick it on the display." The display (shelving) was covered with Post-It Notes, with customers' favorite fresh & easy branded items hand written on the slips of paper.
This is the type of creative merchandising the grocery chain needs to nurture and do more of. It's creative and interactive, inviting shoppers to participate in the grocer's business. We suggest Mr. Mason find out who came up with this idea and put them in charge of "creative merchandising" for the entire chain.
But it's our overall analysis at this point in time that Tesco's Fresh & Easy has yet to create this comprehensive value proposition and merchandising and marketing program. We suggest it follow up on its recent value-based offerings and the type of creative and successful (the items on that particular store's Post-It Note display were selling at a brisk pace) merchandising exemplified by the display we described, and build these various elements (the parts) into a value-based overall (the whole) merchandising and marketing program which then must be positioned and communicated well.
Value needs to be the hub of the Tesco Fresh & Easy wheel (format and overall offering) and then all of the other offerings (prepared foods, natural-organic-specialty groceries, wines, ect.) need to be the spokes. The other offerings are important. But they need to fit in with the overall value proposition and support it rather than detract from it in what we've termed as a "model or format muddle" that exists with Fresh & Easy at present.
We will return later for some further analysis on the topic and issue. But that's all for now.
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3 comments:
The question is if Tesco's current team can fix what they messed up. It usually takes a new team to fix what the previous team failed to achieve. But sounds like the CEO has been reading your Blog. Where Tesco goes now should be rather interesting.
Betting they soon will start taking manufacture coupons, the WIC coupons and paper checks as you suggest they should. I saw a man trying to cash a payroll check in the Eagle Rock,L.A. F&E a couple weeks ago. He said he would spend half of it in the store but the clerk had to tell him sorry but company policy is we don't cash checks. Bet he went to Vons or Ralphs or Food 4 Less and cashed it and spent there.
There is a boutique research company based out of Canada called Fresh Squeezed Ideas (coincidence!) that has the right methodology that would have provided the right insight in the first place - scalable cultural investigation. They are one of only a handful of companies in the world with this method.
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