Thursday, February 26, 2009

Tesco Fresh & Easy, Research and Course Correction: What 'Was' Said and 'its' Context Matters Little; What 'Is' Matters Much, What's Done Matters More

Fresh & Easy Buzz has written much about the various forms and modalities of research that can be used in the food and grocery retailing sector as a way to both better understand consumers, along with better understanding the food retailing market vis-a-vis what a grocer's competitors (and for a new grocer entering a market its upcoming competitors) are doing -- and why they are doing it.

There is no more important use of research, ranging from market-oriented research and analysis to consumer-focused research, than in using it to help gain a better understanding of what is a central fact of American food and grocery retailing: That it is a regional, sub-regional, sub-sub regional, local and neighborhood enterprise.

For example, if you take a state like California -- the nation's largest and the one where Tesco's Fresh & Easy Neighborhood Market is based and has the majority (in Southern California and Bakersfield in the southern Central Valley thus far) of its current 113 small-format grocery and fresh foods markets -- it's not one market, nor even a series of regional markets. California is best viewed as three or four (or even five) regional markets, then broken down into sub-regional markets, sub-sub regional markets on down to local.

The three major regions of the Golden State -- Southern California, the Central Valley and Northern California (each with sub-regions and sub-sub regions within) -- have many similarities in terms of consumer behavior as it relates to food and grocery retailing. But the qualitative differences are vast in terms of demographics and other key variables.

And within each of these three regions there are significant differences as well. What the popular and powerful former Democratic Speaker of the U.S. House of Representatives, Thomas "Tip" O'Neill was famous for saying about American politics, that "All politics is local," can in the main also be said about American food and grocery retailing, which is something we've written often about in Fresh & Easy Buzz. Tip probably would have made a pretty good grocer with that understanding. It served him well in politics, after all.

We've also written often about ethnographic research, and have used an applied Anthropological research modality (participant and non-participant research) in some cases in our coverage and analysis of Tesco's Fresh & Easy and the food and grocery retailing business in general

On Saturday, February 21 we wrote this piece about some comments attributed to Tesco Fresh & Easy Neighborhood Market CEO Tim Mason in a brief story published in the February 22 edition of the Sunday Times of London. Since those comments and direct quotes from Mr. Mason in the story track arguments we've been making for nearly a year about the research the grocery chain did prior to launching its U.S. food and grocery chain -- research in fact that the retailer has publicly said formed the basis for the Fresh & Easy format -- we thought the CEO's remarks in the Times' report were right on, albeit a bit late in coming. We even called the comments attributed in the story to Mr. Mason"healthy" ones.

We also thought they were a good basis for creating a bridge in which the chain and its CEO could now go forward with the changes it needs to make in the Fresh & Easy format, merchandising, marketing and operations if it hopes to succeed in the ways Tesco has planned on doing with the grocery and fresh foods chain in the Western USA.

You can read our February 21 piece here: A Healthy 'Mea Culpa': Tesco Fresh & Easy CEO Tim Mason Says 'We Got it Wrong;' Comments Tend to Agree With Fresh & Easy Buzz Analysis and Arguments.

It appears though that Mr. Mason's comments attributed to him in the Sunday London Times' story were "taken out of context," according to the Tesco Fresh & Easy Neighborhood Market spokesperson, although we've yet to hear from CEO Mason in print in this regard.

We wrote about this development on February 24 here: The 'Mea Culpa' 'Mea Culpa' By Proxy With A Dash of Spin: Tesco's Fresh & Easy Now Says CEO Mason's 'We Got it Wrong' Comments 'Out Of Context.'

What's interesting is that it really doesn't matter if Tesco Fresh & Easy Neighborhood Market CEO Tim Mason said what was attributed to him or not in the Times' story, or if it was "taken out of context" and thus required clarification from the corporate spokesperson (although it is interesting that clarification was in another publication rather than in the Sunday Times) The fact is, Tesco's Fresh & Easy is struggling. And all of that struggle isn't just because of the current economic recession. The chain was struggling pre-recession.

In fact, based on what Tesco has said Fresh & Easy is, and promoted it to the press as -- a neighborhood grocery and fresh foods market for "everybody" (all consumers) that offers everyday prices 15-20% below competitors' everyday prices -- one would think the stores would be thriving in a recession, for that format as described by Tesco would appear to a reasonable observer to be just the retail prescription for cash-strapped shoppers in an economic recession. But this isn't the case at present.

Our analysis is that a major part of Tesco Fresh & Easy's problems goes back to this research -- research the grocery chain touted as being extensive, comprehensive and nearly ground-breaking in its public relations push prior to opening its first stores in November, 2007. Tesco failed, or did so poorly, to do the most basic of all research we argue -- the type of market-based research that would have allowed the retailer to gain an understanding of American U.S. food and grocery retailing in general and Western USA food retailing, particularly with a focus on California, Nevada and Arizona and each states sub-regional, sub-sub regional and local markets.

Had it done this type of research -- and hired an American research team with strong knowledge of the respective local markets to conduct it independently for the company -- it would have learned that no such food retailing gap existed in the market in terms of any lack of grocery chains and independents selling the types of products Tesco offers at the Fresh & Easy stores.

For example, there is nothing revolutionary -- despite the many articles to that effect that were published in the mainstream press before the first Fresh & Easy stores were opened -- about the prepared foods sold at Tesco Fresh & Easy. In fact, California grocers are among the innovators in fresh, prepared foods merchandising, and many have been doing in a major way what Tesco just started doing with prepared foods for a good 15 years, getting better at it each year.

It's not that Tesco should not have opened the Fresh & Easy stores, and as we often say -- "Don't rule Tesco out ever. But it is that, in our analysis, the research was flawed, and we also think some ethnocentrism played a role in how it was conducted.

And as a result, that flawed research -- too much emphasis on focus groups and elaborate in-home ethnographic research and not enough market-based study in an informed and unbiased way -- resulted in Tesco doing so many wrong things with Fresh & Easy that it positioned the stores in a way from the very start that dramatically decreased its odds of success.

Tesco's Fresh & Easy has also been super-slow on the draw in course-correcting. It appears CEO Mason is realizing some changes are "now" needed -- such as focusing on value and stronger and more frequent promotions, two things we've been emphasising and suggesting in our analysis for about eight months -- but those changes needed to come in about the third quarter of 2008, when it was clear the current direction -- which we've still not figured out is -- was not working. It's not too late though. We think Fresh & Easy has strong potential if fixed.

But now Fresh & Easy's corporate spokesperson has said CEO Mason does not believe any of the initial research was flawed -- that it was just fine. That Mr. Mason's comments in that regard were taken out of context. That he meant nothing of the sort. Instead, the company's position is that any problems at Fresh & Easy are due to the current recession, according to spokesperson Brendan Wonnocott in the Supermarket News report and in a couple other published reports yesterday.

We think that's too bad. Why? Because the research is flawed, or the conclusions drawn from it are, take your pick, and it is our analysis that unless that is realized by CEO Mason and the other senior executives at Tesco's Fresh & Easy, it isn't likely they will be able to make the changes needed to move the grocery chain forward to success.

For a thoughtful and interesting analysis of that research, we suggest you read a piece posted yesterday by Applied Anthropologist Grant McCraken in his Blog: "This Blog Sits at the Intersection of Anthropology and Economics." The piece, "Ethnography is not an in-home interview," directly addresses the Tesco Fresh & Easy research within the framework of ethnographic research, which is the writer's specialty. Click here to read his post.

We will offer additional original analysis and thoughts on the research and related issues in an upcoming post in Fresh & Easy Buzz.

Supplemental reading from the Fresh & Easy Buzz archives:

February 21, 2008:

March 24, 2008: The Analysis of Tesco's Fresh & Easy From Piper-Jaffray's Mike Dennis in This Interview Published Today Sounds A Lot Like Ours For the Last Few Months

April 1, 2008: Supermarket News' Fresh & Easy Cover Story: Industry Analysts and Others Agree With Our Multi-Month Argument That Fresh & Easy Stores Need Local Focus

April 3, 2008: Our 'Fresh & Easy Stores' Lack A Sense of Place' Theory is Growing; Read What We and Others Are Saying Tesco Needs to Do With Fresh & Easy

April 9, 2008: USA Today Discusses Themes We Sound Off On Here at Fresh & Easy Buzz Near-Daily: Neighborhood, Community and 'Sense of Place' in American Retailing

April 28, 2008: Having Trouble in the Neighborhood (Market)? Who You Going to Call? Gene Hoffman Would Be a Good Start

May 16, 2008: Tesco is Incorporating New Interior Design Elements and Enhancements Inside its 61 Fresh & Easy Neighborhood Market Grocery Stores

May 7, 2008: May 7, 2008: Feature & Analysis: Tesco is Launching A Major 'Local Foods' Program in the United Kingdom; Why Not Do the Same At Fresh & Easy USA?

Wednesday, July 23, 2008: Fresno, California Fresh & Easy Grocery Store to Be First in Chain to Include Local, Community and Neighborhood Design Elements and Features

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