Monday, March 2, 2009

Fresh & Easy Buzz Redux: Much of the Value Proposition-Based Analysis and Suggestions We've Been Offering Now Being Adopted By Tesco's Fresh & Easy

Pictured above are two very recently introduced value-oriented merchandising plays by Tesco's Fresh & Easy: Its 98-cent value-priced fresh produce packs (at top) and its "Everything under $1 store-within-a-store sections in its stores (above). [Photo Credit: Tesco Fresh & Easy Neighborhood Market.

The Wall Street Journal has a story today, "Tesco Tries to Hit a U.S. Curveball," in which it interviews Tesco Fresh & Easy Neighborhood Market CEO Tim Mason.

[Note, the Wall Street Journal quotes Tesco in the story as saying Fresh & Easy Neighborhood Market's current overall sales-per-square-feet for its 114 stores is $11. If so, that's 21-cents per square-foot below the U.S. supermarket industry average, which is $11.21 per-square-feet in weekly sales, according to the most recently published statistics by the Food Marketing Institute (FMI) we can find here.

Also, Tesco bases its $11 per square-feet average sales number, and has since day one, on using 10,000 square-feet as the average store size. The problem with this is that we aren't aware of any Fresh & Easy stores smaller than 10,000 square-feet. But there some stores with over 10,000 sqaure-feet of selling space, some up to about 13,000 square-feet. This fact gives us a bit of a problem with using 10,000 square-feet as average store size. But we welcome an analysis from Tesco Fresh & Easy of the selling space square-footage of all of its 114 stores that adds up to the 10,000 square foot average store size.]

The focus of the Wall Street Journal's piece is about Tesco Fresh & Easy's attempts to change its positioning to a value-based food retailing model in which it offers lower prices in store and in media promotions like its advertising fliers (more of a high-low model), including deep discounts; is introducing more value-based and priced items across all product categories, including its fairly new Buxted store brand discount fresh meat line; promotes and advertises heavily with a price and value focus -- both using its print media fliers (and more frequent issuing of the ad fliers), selected radios spots and the Internet -- and overall is attempting to now position, market and promote Fresh & Easy as a value-oriented grocery chain.

The thing is, Tesco always claimed Fresh & Easy was a value-based grocer, among other things touting from day one that it offers food and groceries it claims are 10% -to- 20% cheaper in rice everyday than its competitors offerings. For a variety of reasons we've detailed in Fresh & Easy Buzz, shoppers haven't bought it. The main reason consumers haven't bought it is that Fresh & Easy hasn't really been, nor is at present, a value-based grocer.

We've been writing about Tesco Fresh & Easy change in the value direction for a few weeks now, including our recent stories about CEO Tim Mason's comments in the Sunday London Times article.

This move by Tesco's Fresh & Easy to a value-approach, including most of the specifics mentioned by CEO Mason in the Wall Street Journal piece, come in part right out of the pages of Fresh & Easy Buzz, as we've been suggesting beginning as early as 14 months ago that it is the value-based model Tesco needs to adopt, develop and then communicate consistantly to consumers, as the focus of the Fresh & Easy stores. We call value the positioning hub for Fresh & Easy, with all other merchandising aspects of the chain and stores then being the spokes of that hub. [You can read the story here in today's Wall Street Journal.]

We've also suggested, going back to March of 2008, that Tesco should use selective radio advertising as part of an integrated marketing mix and program, which it recently started doing (using radio but not yet integrating its marketing strategy fully), and is mentioned as doing in the Wall Street Journal piece.

We've also been suggesting, beginning about a year ago, and often since, that Tesco's Fresh & Easy needs to distribute it once-every-three-weeks advertising flier more frequently, or distribute supplemental fliers, which it recently has started doing in an aggressive way.

For example, Fresh & Easy has issued at least three supplemental advertising-promotional fliers since issuing its most recent regular once-every-three-week flier, which amounts to a promotional flier being mass mailed about once a week over the last month.

That frequency increased shortly after we published this piece: [Tesco Fresh & Easy's 'New' Advertising Flier: Minimalism Without Thought or Design Does Not A Retail Advertising Communications Piece Make] on January 27, 2009. In the piece we questioned the design (or lack of) of the flier for its too simple black ink on plain white paper look, as well as its crowded layout. Since then all of the Fresh & Easy ad fliers thus far have included color, and have a much improved (work still needs to be done on them though) design layout.

Fresh & Easy also has stepped up the discount pricing (hotter) in the ad fliers, which we've been suggesting it needs to do for many months.

For an example of the grocery chain's deeper discount promotional pricing, read this February 13, 2009 piece [The Valentine's Day (Retail Promotional Price) War of the (Dozen Long-Stemmed) Red Roses: And the Winner Is... Tesco's Fresh & Easy] we wrote about the Valentine's Day-themed flier.

Fresh & Easy also tied-in the red roses promotion in the ad flier with radio ads, something we first suggested the grocer do (integrate selected promotions in the ad fliers with radio spots on a selective basis) a year ago. [See the linked posts under Fresh & Easy Buzz Redux: Tesco's Fresh & Easy & radio advertising below.]

In its most current supplemental ad flier, Fresh & Easy is featuring whole chickens under its fairly new Buxton value-positioned fresh meats category store brand for 69-cents a pound, which is currently among the hottest promotional prices in California, Nevada and Arizona for the whole birds. Read our comparitive analysis of one of Tesco Fresh & Easy's ad fliers in an October 1, 2008 piece here: ['The Promotional Pundit:' Fresh & Easy Buzz Analyzes, Offers Suggestions and Grades Tesco Fresh & Easy's Bi-Weekly Advertising Flier.]

We also wrote the paragraph reprinted below in italics in the October 1 piece:

"We do suggest the grocery chain go from a fortnightly (one flier every two weeks) to a weekly ad flier. It's the norm in U.S. food and grocery retailing. Especially for those chains that aspire to the "big time." It also creates more excitement in the stores -- more in-an out deals, ect." [Historically the Fresh & Easy direct-mail paper fliers have come out every two -to- three weeks. The online versions every three weeks. Our comments about liking the flier design were about the original Fresh & Easy designed flier, before they changed it to the plain white paper version, which as we mentioned above has now been upscaled a bit, adding color, and getting better.]

Below, under the heading "Fresh & Easy Buzz Redux," we list a partial (there are many more stories on the topics in the Fresh & Easy Buzz archives), linked bibliography of stories offering analysis, arguments and suggestions put forward by Fresh & Easy Buzz regarding Tesco's need to move towards the value propostion with its positioning, merchandising, operations and marketing of Fresh & Easy Neighborhood Market USA.

Additionally, we include a few links in which we suggested in stories that Tesco's Fresh & Easy should include selective radio advertising in its marketing mix, and needs to offer better promotional price points in its advertising fliers, along with issuing those fliers on a much more frequent basis. Both, along with the overall value proposition, are elements which the grocery chain is now attempting to incorporate into its merchandising, marketing and operations.

>Fresh & Easy Buzz Redux: On the Fresh & Easy value propostion and value-oriented positioning imparitive. A sampling of past stories from Fresh & Easy Buzz:

February 21, 2008: A Look At Fresh & Easy @50 (Stores): An Analysis and Some Suggestions For Going Forward. [Click here to read.]

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

June 8, 2008: Las Vegas Region Market Report: Signs of Recession in Usually Immune Las Vegas; Why Isn't Tesco's Fresh & Easy Touting its 'Value Proposition'?

June 18, 2008: Tesco's Fresh & Easy and it's 'Value Proposition:' We Asked, They Answered; Discussion, Deconstruction and Fresh & Easy Buzz Analysis

June 8, 2008: Arizona Region Market Report: First Signs of A Weakening Might Be Starting to Show in the 'White-Hot,' 'Super-Competitive' Arizona Market

March 29, 2008: Tesco's Fresh & Easy 'Taking a Pause' From New Store Openings: A Full Review In the Works

August 4, 2008: The Value Proposition: Whole Foods Market's New Focus on 'Value' Demonstrates the Importance of the Value Proposition Currently in U.S. Food Retailing

June 30, 2008: Southern California Region Market Report: The Coming 'Store Wars' in the High Desert Market; Kroger Co.'s Ralphs Lowers Prices, Ups Value Proposition

May 4, 2008: Aldi USA, the Fastest-Growing Small-Format Grocer in the U.S. Promotes Everything But the Kitchen Sink (and Maybe That's Next) In its Weekly Store Ads

November 24, 2008: A Single Bird in the Ad (Even Wrapped in Bacon and Sage) Does Not Make For A Good Thanksgiving Promotion For A Neighborhood Grocer For 'Everybody'

November 20, 2008: Analysis & Commentary: Fresh & Easy Neighborhood Market and Tesco's Lowered Expectations

November 12, 2008: Breaking News: Tesco's Fresh & Easy Considering Two Major Changes, One Physical the Other Design Oriented, to Increase Sales in its 100 Stores

November 16, 2008: November 16, 2008: Tesco Fresh & Easy CEO Tim Mason Says He's 'Deliriously Happy' With the Chain's Progress Thus Far; We Prefer Andy Grove's 'Only the Paranoid Survive'

September 4, 2008: News & Analysis: Tesco's Fresh & Easy Launches New Direct Mail Promo Piece Full of $5-Off Discount Coupons; Is it Taking Deep-Discounting Too Far?

October 1, 2008: 'The Promotional Pundit:' Fresh & Easy Buzz Analyzes, Offers Suggestions and Grades Tesco Fresh & Easy's Bi-Weekly Advertising Flyer

November 12, 2008: November 12, 2008: Analysis: Hard Times at Fresh & Easy - Northern California Expansion to Be Postponed or Shelved Do to Economy; But its Only a Symptom Not the Cause

December 15, 2008: Food & Grocery Retailing in the Recession: Wal-Mart CEO Describes Changes in Consumer Behavior-More Cheap Basics, More Cooking at Home; More Leftovers

December 12, 2008: Marketing & Promotions Report: Manufacturers' Coupons Becoming the 'New Black;' Use Among Consumers Soaring; Marketers Distributing More Than Before

January 30, 2009: Breaking Buzz: Tesco's Fresh & Easy Distributes its First Promotional E-Mail Alert Today; Has the Grocer Been Reading Fresh & Easy Buzz This Week?

[Click here for more related stories regarding the value proposition, needed pricing model, ect. for Tesco's Fresh & Easy Neighborhood Market.]

>Fresh & Easy Buzz Redux: Tesco's Fresh & Easy and radio advertising:

Linked below are a few pieces suggesting strongly that Tesco's Fresh & Easy should use selective radio advertising as part of its marketing-media mix, particualrly putting a focus on the value proposion. Note we first offered the selective radio advertising suggestion as part of our analysis of Tesco's Fresh & Easy over one year ago.

February 21, 2008: A Look At Fresh & Easy @50 (Stores): An Analysis and Some Suggestions For Going Forward. [Click here to read.]

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 17, 2008: Vegas Baby!: Tesco Announces Ten More Fresh & Easy Grocery Stores For The Las Vegas Metro Region; it's All About 'Critical Mass'

>Fresh & Easy Buzz Redux: On Tesco Fresh & Easy's need to promote deeper price discounts, create value, and issue more frequent advertising fliers and implement other promotional vehicles.

[Click here for a selection of stories/posts from Fresh & Easy Buzz on these related topics.]

Value isn't just discount prices

If you read through the Fresh & Easy Buzz archives, you will notice the concept of the value-proposition informs many of the analysis pieces we've written and published in the Blog, along with informing our merchandising, marketing and operations suggestions for Tesco's Fresh & Easy Neighborhood Market.

It is important to point out, as we always do, that value does not merely mean offering deep- discount prices on items. It is though a key part of the process, and one that is important, particularly right now from a price-impact basis.

Value proposition is a comprehensive strategy

Value is the offering of low, everyday prices as well as promotional prices. But that's just one tactic in the strategic value proposition strategic mix. Good promotional pricing is a tactic, the value proposition is the overall strategy that informs the various tactics, including good promotional pricing and discounting.

Value means creating a grocery chain in which consumers not only perceive that it's a solid place to shop for low-priced food and grocery items but also where they believe can obtain the best overall "value" for their food and grocery shopping dollars.

Among other criteria, achieving value means offering the best price-to-value (quality) formula in the market. For example, cheap chickens only offer value if they are of a certain level of quality -- the price/value ratio. Safeway last week offered Foster Farms brand whole chickens for 77-cents a pound. Fresh & Easy offered its value store brand whole birds at 69-cents a pound last week and this week. Consumers will determine the price-to-value-ratio in that eight cent per-pound difference. The market is wonderful in that regard.

Also, great prices like Fresh & Easy's $9.99 per-dozen bunches of long-stemmed red roses for Valentine's Day last month are only good if a retailer is able to maintain a decent in-stock level on the product. It's OK to run out of the red roses on the holiday. But many if not most Fresh & Easy stores ran out of the $9.99 a dozen red roses pretty much everyday at noon beginning the very first day of the promotion, according to reports we received from a number of store-level employees and customers. (At that price people weren't just going to buy them for Valentine's Day, after all.) Read the comments in the comments section as well here: [The Valentine's Day (Retail Promotional Price) War of the (Dozen Long-Stemmed) Red Roses: And the Winner Is... Tesco's Fresh & Easy.]

A simple solution to this chronic out-of-stock problem would have been to only offer the $9.99 dozen long-stemmed red roses deal on the Friday before, and on Valentine's Day, which was on a Saturday. That also would have added store foot traffic on those two specific days.

Tesco's Fresh & Easy has to be careful not to repeat such mistakes (it was a corporate buying problem) because such chronic out-of-stocks actually take away from the value proposition despite the item pricing being so hot. What value is it to a shopper if they are unable to buy the $9.99 roses even three days before Valentine's Day after two trips to their local Fresh & Easy store in an attempt to do so? The answer: zero value.

There is a need for better coordination and communication between corporate merchandising and the stores at Fresh & Easy -- particularly from headquarters in listening to the store-level employees. For example, we know many store managers were telling headquarters to load up on the $9.99 red rose bunches because sales were going to be massive. But it didn't happen. The result: numerous unhappy shoppers. Value lost.

Towards the value proposition and value-based positioning?

We see Tesco's Fresh & Easy moving closer to the value-based positioning we started suggesting it needed to do a year ago with its "dollar sections" in the stores, value-priced produce and meat packs, beginnings of more frequent item promotions and more advertising fliers and use of other media like radio and the Internet. It's our analysis that each of these introductions has been a positive one for Fresh & Easy. And we like the 98-cent value produce packs and the $1 sections in the stores, for example, from the perspective of building that value postion.

But the grocer needs to do much more. And most important, it needs to create take all of these tactics and combine them in that overall value proposition in its merchandising, marketing and operations, and integrate them -- value as the hub, all else as the spokes.

We are seeing a movement in the right direction though in terms of the increased focus on the value proposition by Tesco Fresh & Easy.

And over the last 3-4 weeks we've seen a difference in the customer counts at a number of Fresh & Easy stores we've monitored over many months, as well as having received reports from regular Fresh & Easy Buzz correspondents in California, Nevada and Arizona that they have in some cases been seeing the same thing in the specific stores they monitor for the Blog.

We will be covering where this beginning goes, as always, in Fresh & Easy Buzz.

1 comment:

Anonymous said...

Have been reading the blog since mid-2008 and completely agree with your analysis about Tesco needing to go local with the Fresh & Easy stores. Doesn't seem they get that yet though as I see very little if any adaptation to local markets in the stores. Arizona looks like Vegas and Vegas looks like Orange County when it comes to the merchandising in the stores. Big mistake.