Consumer Behavior & Retailing In the Recession: Gauging the Mindset of the 'New Frugal American Shopper' In An 'All Retailers Are Discounters' Time

Beginning in about mid-2008 (to the present) Fresh & Easy Buzz first started to write regularly about how consumers were beginning to trade down in terms of where they are shopping for food and groceries (types of stores), how much they're spending, what they're buying and how they're buying it, due to the then beginnings of -- and now full-blown -- the current economic recession. This consumer trading down behavior has decreased dramatically from then to now. It's our analysis it will continue all year and well into 2010 at the very least.

Among the recession-induced changes in consumer food and grocery shopping behavior we've sited include: a shopper flight to discount food-grocery stores like Wal-Mart, Aldi, Sav-A-Lot and similar price-impact-focused stores; consumers buying fewer prepared foods items and more staples and basics for cooking at home; an overall decrease in the amount of money shoppers are spending on food and groceries, particularly on premium, specialty, organic and impulse items; shopping weekly sales more frequently and cherry-picking retailers advertised items; purchasing more store brands if such items are cheaper than national brands; the dramatic increase in consumer use of manufacturers' "cents off" coupons and retailer store coupons; and a number of other indicators all pointing to the fact there now exists in large numbers what we call "the new frugal American food and grocery shopper."

In our research we see this trading down at retail across the board. Some evidence:

There are more BMW's, Mercedes and luxury SUV's in Wal-Mart, Dollar Tree, Dollar General and Costco parking lots than we've ever seen before, for example.

Goodwill stores are so packed and doing so much business that many are aggressively searching for used product, and for the first time ever paying for it in some cases.

And when it comes to eating out, MacDonalds' sales are soaring (and dollar menu items selling off the charts), while even mid-range restaurant chains like Applebees are struggling. MacDonalds said last week it is shooting to open 1,000 new stores globally this year.

The small-format, hard-discount chain Aldi USA, which is based in Illinois and has nearly 1,000 stores in the southern U.S., Midwest, Mid-Atlantic and eastern regions of the U.S. is booming, while higher-end grocers like Whole Foods Market is struggling, for example.

Aldi USA is doing so well in the bad economy that is entered the Florida market late last year, building a distribution center there and the first of what it plans to be many stores.

This year Aldi USA is entering two brand new markets, New York State and Texas. Florida, New York and Texas, along with California, happen to be the top food and grocery sales markets in the U.S. in terms of total dollar sales. Aldi USA plans to open at least 100 new stores in the U.S. this year.

Aldi USA also is getting ready to launch a major television advertising campaign in all of its U.S. markets because it believes it can pull even more shoppers into its stores with what will be retail brand-oriented ads that will tout Aldi's low-price and value model and message, depicting it as the "perfect" grocery store for today's tough times. Read: money savings and value everyday.

Just like upscale, specialty and premium-oriented grocers like Whole Foods Market, Bristol Farms (Southern California) and Dean & Delucca loved the "go-go" mid-to-late 1990's, it appears small-format, hard-discounter Aldi USA, which is the American division of Germany-based Aldi International, is lovin' not so "go-go" 2009.

It's our argument that "all grocers are now discounters" in this seriously down economy. That even includes upscale retailers like Whole Foods, which has been lowering prices in its stores, promoting-discounting on price heavily, and even periodically offering store coupons good for 10%-25%-off purchases of $25, $50 and $100. Until last year Whole Foods was about as far from a "discount-oriented" grocery chain as one could find in the U.S. At present, price and value are the two key merchandising and promotional strategies at Whole Foods.

By "all grocers being discounters" we of course mean each in its own ways. Aldi is different from Whole Foods, and Wal-Mart is different than both in its discounting behavior. But we do mean that regardless of format or positioning, all grocers are today discounting. Some just aren't doing it well. Others might not even know it is what they are doing.

While our focus is on food and grocery retailing in Fresh & Easy Buzz, the same "all retailers are now discounters" theory holds true across nearly every type of retail format at present in the U.S., from clothing and books to consumer electronics and home stores.

High-end fashion retailer Saks has been regularly holding 50%-70%-off sales in its upscale stores, for example. Department store chain Macy's appears to be offering nearly everything it sells in its department stores on sale these days if you visit one of the stores. And even the super-popular "Apple" stores (Apple computer) have started discounting Apple lap top computers, iphones and ipods recently.

Time magazine has now discovered the dual consumer-retailer behavior change we've been describing and writing about in Fresh & Easy Buzz. That duality is the combination of the "new frugal American consumers" and the "all retailers are discounters" proposition, a result in the main of the trading down behavior by so many consumers.

Time sought out Paco Underhill, the well-known consumer researcher, retail analyst and author of the excellent book, "Why We Buy: The Science of Shopping," to, in Time's words,"gauge the current mindset of the American consumer." Trying to do just that is fast-becoming the number one activity of America's retailers right now.

Time magazine staff writer Sean Gregory talked to Paco Underhill, the founder and CEO of the consulting firm Envirosell, about the "mindset" of today's cash-strapped, economic confidence-lacking, job-insecure American consumer for a piece published in the magazine yesterday. We suggest reading the story as your supplemental reading for the day. It's well worth the few minutes it takes to read it.

Click here to read "How Consumers Shop Differently Today" from the February 22, 2009 addition of Time.

Competitor News: Black Friday's' Black Mark - Family of Wal-Mart Store Employee Stampeded By Shoppers Files Lawsuit

Lina Munoz, right, of Union City, N.J., a Wal-Mart employee, stands on a counter to help customers at the Wal-Mart store in Secaucus, N.J. on Black Friday, the day after Thanksgiving. [Photo credit: Associated Press.]

The family of the temporary Wal-Mart employee at the Long Island, New York USA Wal-Mart store who was trampled to death by stampeding shoppers on the day after Thanksgiving, know as Black Friday, the kickoff of the Christmas holiday shopping season, has sued Wal-Mart Stores, Inc. and others over the worker's death.

Additionally, local police are suggesting the Long Island Wal-Mart store could have prevented the workers death.

No criminal charges against Wal-Mart have been filed to date.

However, legal experts say there likely will be additional lawsuits filed against the company.

The death also might trigger investigations into Wal-Mart policies involving store safety, along with the policies of other retailers as well.

Jeffrey Toobin, a former federal prosecutor and current legal analyst for cable network CNN and legal affairs writer for the New Yorker magazine, said today on CNN he didn't think criminal charges would likely be filed against Wal-Mart Stores, Inc. over the tragic death-by-customers at the Long Island store because it would be extremely difficult to demonstrate an intent on the part of the retail chain regarding the incident. However, he added he would not rule out completely the filing of criminal charges, saying if the pressure to do so becomes great it could happen.

Below are a few select reports on the lawsuit from today:

CNN.com: 2nd UPDATE:Wal-Mart,Others Sued Over Death Of Trampled Worker....Los Angeles Times: Family of Wal-Mart employee trampled by shoppers files lawsuit....Associated Press: Video: Police: Crowd at Wal-Mart 'recipe for Disaster'Video: Police: Crowd at Wal-Mart 'recipe for Disaster' ....NPR: Deadly Stampede At Wal-Mart Not Surprising....Washington Post: Attention, Shoppers: Where's Your Humanity?....

New York Post: WAL-MART BLACK FRIDAY HORROR....Advertising Age: Lawsuit: Marketing A Factor in Wal-Mart Trampling Death....Times Online - UK: Shopping is hell among the greedy and the grasping....Huffington Post: David Nassar: Wal-Mart's Failure to Protect Its Workers: An ....Comments for the Overlawyered Blog: Wal-Mart trampling suit....Blogging Stocks.com: Blaming Wal-Mart for worker's death - ....Neighborhood Retail Alliance Blog: The Neighborhood Retail Alliance: Wal-Mart Insecurity....

The madness of the crowd and the economy

We can't help think about the symbolism of this sad incident this year. In this current economic recession, consumers are in a psychological state of mind for the Christmas holiday season unlike any other in modern times. No money, no credit, and even worse -- a lack of optimism. Despite that fact, Thanksgiving weekend sales were actually about 3% over 2007 Thanksgiving holiday weekend sales. That's odd.

Why the spending when most said it wouldn't happen? Why the madness of the crowd at the Long Island Wal-Mart store?

Perhaps it was all the discounts out there? Perhaps it's also all the pent up shopper demand within American consumers this year because of the recession, which now is official, and financial crisis, along with the housing foreclosures and the layoffs.

The madness of the crowd at that Long Island Wal-Mart -- the way they ran over the store employee -- might be a collective symbol of how consumers are feeling psychologically and emotionally right now. The madness of the crowd looking for a bargain. The madness of people in a very uncertain economy.

But we should remember, it is only consumerism.

But then perhaps only is the wrong word, since the U.S. and most other western economies are now built on consumption rather than producing. Like President George Bush said when ask right after the September 11, 2001 terrorist attacks what Americans could do to help: "Go shopping, go about your regular business."

And of course, what's the solution to the current recession? Increase consumer confidence so people will spend more. And since most don't have anymore to spend, give them another tax rebate stimulus check, and hope they spend it rather than use it to pay off credit card bills. In today's American economy, the consumer is King...and Queen. But also the goat when they can't spend.

Watching a video of the way that crowd stampeded over the Long Island Wal-Mart store employee, like the worker wasn't even there, made us think about how human beings could be so single-minded in pursuit of a deal on a product or two.

We will leave that analysis to the practicing behavioral and social scientists. But we do wonder if in some way the madness of that Wal-Mart store crowd is not a symbol of today's ravaged consumer, at least in some perhaps abstract way?

After the death-by-customers incident at the Long Island Wal-Mart store on Black Friday 2008, that term -- Black Friday -- now takes on a completely new definition besides its original one, signaling the start of the Christmas shopping season.

Consumer Briefing: The New, Frugal and Near-Broke American Consumer is Staying Home For the Holidays

What Others Are Saying: From: Natural~Specialty Foods Memo

It looks like American consumers will be staying 'home for the holidays' in much higher numbers this Thanksgiving and Christmas than in the past. That shouldn't be a surprise really. After all, nearly all of us are broke.

Based on a number of surveys and other sources of information, it looks like many more consumers are staying home for Thanksgiving this year compared to last, and slightly more will be staying home for Christmas.

It appears many who had planned to go away to visit family for both Thanksgiving and Christmas can only afford to do so for one of the holidays. Therefore, most are opting to do so for Christmas (and those plans could change for many) and stay home and cook dinner for Thanksgiving at home. Many can't afford to leave home for either holiday -- and in fact are hoping to be able to run the furnace to keep them warm while enjoying their holiday dinner at home.

That's bad news for restaurants, the airline companies, gasoline stations, motels/hotels and other businesses that cater to holiday travelers.

However, it is good news for food and grocery retailers. The stay at home Thanksgiving 2008 trend means more people will be shopping at retail grocery stores because they are preparing dinner for family, relatives and friends at home.

Additionally, since the Thanksgiving weekend is a four-day holiday (Thursday-through-Sunday) for most, not going away means consumers will need to stock up on everyday and post-holiday provisions for the long weekend at home. After all, leftover turkey and trimmings is fine the next day. But by Saturday even the super-frugal need something else. That's more good news for grocers and those who supply stores.

The food and grocery industry Blog, Natural~Specialty Foods Memo, has a current piece about this staying 'home for the holidays' trend. You can read the story here: "Consumer Behavior Memo: 'Uber-Cocooning' -- Many American Consumers Staying 'Home For the Holidays' Out of Forced Economic Necessity."

Of course, just because millions more American consumers are staying home for Thanksgiving and Christmas this year (many are still traveling of course; just far fewer) instead of going away, and therefore will be buying more food and groceries at the grocery store, that doesn't mean they plan on splurging and spending the equivilent of say four airline tickets from home in Southern California to mom and dad's (and the grandparent's for the two kids) house in Texas, a trip they might have planned earlier this year but canceled after the financial crisis and recession hit full-blown a few months ago.

Instead, we're seeing a major trend towards frugality among American consumers, which we've been writing about in Fresh & Easy Buzz regularly. Shoppers are trading down from higher-end supermarkets to discounters, using more manufacturers' and retailer coupons (manufacturer coupon use is up 30% since February of this year), eliminating lots of their purchases of organic, specialty, premium and prepared foods, and going to the grocery store less often, buying fewer items when they do.

Natural~Specialty Foods Memo has a story highlighting and discussing this new phenomenon, the new, frugal American consumer. It's a trend every retail grocer must pay attention to, and market and merchandise to, in order to survive in this current recessionary economy. It's an economy that's going to get far worse. For example, most analysts are suggesting the current 6.5% U.S. unemployment rate should hit 8% by the first of next year, and could even go as high as 10% by mid-2009.

Read the piece from Natural~Specialty Foods Memo here: "Consumer Behavior Memo USA: 'Life, Liberty and the Pursuit of Frugality' - America's New Consumer Frugality."

Even high-income shoppers are cutting back dramatically, according to sales figures at more upscale stores as well as from survey data.

While the retail food and grocery industry in the main isn't being hurt to anywhere near the degree other format, such as department store and specialty general merchandise retailers are, there are players in the grocery retail sector that are suffering considerably. Those doing well are the discounters -- Wal-Mart, BJ's Wholesale Club, Costco, as well as supermarket chains such as Safeway Stores, Inc. and others --that are lowering prices (and costs), continuing to fine tune their value propositions, and communicating those propositions to shoppers in a variety of ways (different media and in-store) on a consistant and regular basis.

We believe the recession will last for all of 2009, getting worse and deeper before the economy begins to improve, even with the $500-$700 billion stimulus package President-elect Barack Obama is asking Congress to have passed and ready for him to sign when he takes office the last week of January, 2009.

Therefore, we have three words of advice for all food and grocery retailers -- value proposition, value proposition, value proposition.

Every retailer in the U.S. -- from Whole Foods Market, Dean & DeLuca and every upscale chain and independent, to conventional retailers and even discount format operaters -- must have a solid value proposition unique and customized to their particular retail formats and operations.

This value proposition needs to be clean, consise, clear and comprehensive.

It needs to be a major part (if not the major part) of any grocery retailer's mission from today on. It should have been since early this year. But it isn't too late. But it is getting to be too late.

In this economy, value is the key variable across all consumer classes and income levels. Just ask New York City's famous Saks Fifth Avenue high-end department store chain. Last week the upscale retailer, which has done fine during the last two U.S. recessions, discounted most of its designer clothing, shoes and other items (Gucci, Prada, ect.) by 40% -to- 60% -- and it still isn't selling, even to those high income consumers who comprise Saks' customer base.

While consumers have to by groceries and eat, but not buy Gucci or Prada, they don't have to shop at any given supermarket. They are demonstrating this fact by trading down; there's a flight to value when it comes to food and grocery stores. Those who recognize this, devise the value proposition we describe and then communicate it well, like Wal-Mart is doing on all counts right now, will not only survive the next year or more, but also will thrive.

Related stories:

>Retail Memo: What's Next For U.S. Retailers if the Economy Picks Up in 2010?

>Retail Memo: Customer-Owned Retail Food Cooperative Stores Gaining New Popularity in Recessionary America

Southern California Market Report: Lou Hirsch On Changing Grocery Shopper Behavior in Southern California's Inland Empire Region

Shopper Laurel Speer pays close attention to values and prices as she shops the meat case at the Henry's Farmers Market store in Temecula, California. [Photo: Frank Bellino/The Press-Enterprise.]

Lou Hirsh, a staff writer for the business section of the Press-Enterprise newspaper, which is based in and covers Riverside and San Bernardino counties in Southern California's Inland Empire region, has a piece in today's edition of the paper about the various ways shoppers are attempting to save money during the current economic downturn, which most economic experts like Stephen Levy of the respected Center for the Continuing Study of the California Economy in Palo Alto say has now likely become a full-blown recession in California.

Among the ways described in the story in which shoppers are trying to save money on food and groceries include:

• Trading-down from national brand to private label products if the prices on the private label items are cheaper
• Trading-down from premium to mid-level food products.
• Buying bulk foods and cooking more at home from scratch rather than eating out or buying prepared foods at the supermarket.
• Using manufacturers' cents-off coupons to save money on their total grocery order purchases.
• Shopping at salvage format grocery stores such as Grocery Outlet, which specialize in selling manufacturers' close-out and overstock items and food and grocery products with minor label mistakes or in slightly blemished condition.

Grocery Outlet and other salvage grocers buy these products in large quantities for a deep discount from manufacturers and in turn sell them in their stores for much cheaper than the same items sell for in most supermarkets.

For example, here's what Eric Lindberg, the co-CEO of the Berkeley, California-based Grocery Outlet chain says in the story about recent business in the stores:

Eric Lindberg, co-CEO of Berkeley-based Grocery Outlet, said his privately held company has seen "double-digit" increases in sales and foot traffic compared with last year at its 135 locations, which include stores in Hemet and Victorville.

Hemet and Victorville are in Southern California's Inland Empire region which includes Riverside and San Bernardino counties. Tesco's Fresh & Easy Neighborhood Market's distribution center is based in Riverside County and the Inland Empire region is one of the retailer's top focuses for its small-format Fresh & Easy grocery stores. In fact the very first Fresh & Easy market opened in late October, 2007 in the city of Hemet. Since then Tesco has opened numerous Fresh & Easy stores in the region.

Another interesting change in shoppers' habits is commented on in the story by Janet Little, who is the the staff nutritionist and spokesperson for the Henry's Farmers Market chain in Southern California.

Janet Little, a nutritionist and spokeswoman for Irvine-based Henry's Farmers Market, which has seven Inland locations, said the chain in the past year has seen lower demand for items like gourmet cheeses and increased purchases of its bulk items, such as sugar, flour and other ingredients that families are purchasing to make full meals at home.

Read Lou Hirsh's story in today's Press Enterprise here. We suggest you read the entire piece. It's a good, quick read.

Analysis: The 'Cognitive Dissonance' Between Tesco's Fresh & Easy Neighborhood Market Format Strategy and Present Format Reality; Just Ask the Mayor

As Fresh & Easy Buzz has written about in a number of pieces, it's our analysis that Tesco's Fresh & Easy Neighborhood Market format has a serious identity problem among consumers, something the retailer denies publicly.

For example, according to Tesco PLC CEO Sir Terry Leahy, Fresh & Easy Neighborhood Market CEO Tim Mason, and Fresh & Easy marketing director Simon Uwins, the target market for the Fresh & Easy small-format, combination basic grocery and fresh foods markets is "everybody" (all consumers); hence the name "Neighborhood Market."

All three Tesco executives have stated this positioning statement about the format and the stores numerous times in print and verbally to multiple audiences. It's also a major part of the retailer's marketing PR materials.

The Fresh & Easy grocery stores are designed to appeal to all shopper demographics, unlike say Trader Joe's and Whole Foods Market which are more specialty-oriented food stores.

Fresh & Easy's entire strategy is based on this positioning. It's goal is to be the neighborhood grocer, which is why it is employing what we call a "critical mass" retail store strategy, opening stores within about one and a half -to- two miles of each other in the key market areas of Southern California, the Phoenix Metropolitan region, and the Las Vegas, Nevada Metro area. The retailer will be doing the same in Northern California where it will start opening stores early next year.

Fresh & Easy's merchandising strategy also is based on the premise that the stores are for "everybody." That's why the grocery markets offer a limited assortment of store brand and national brand basic grocery items priced at an everyday low price, fresh meats and produce, fresh, prepared foods priced reasonably, and a limited assortment of specialty wines and foods, along with some non-foods.

Tesco's strategy and goal with Fresh & Easy is to be a primary shopping venue, and a limited secondary one, just like Safeway, Albertsons, Basha's, Wal-Mart and other supermarkets. The difference, similar in some ways to Aldi and Sav-A-Lot for example, is the the Fresh & Easy grocery stores are small-format and limited assortment, rather than being a traditional supermarket.

As our analysis has shown we suggest, consumers are confused. Those customers who regularly shop at Fresh & Easy stores "get it" (the format). However, that is rather meaningless since if they didn't "get it" they wouldn't shop at the markets.

Rather, what has meaning (and accounts for lost potential sales) is the fact so many consumers don't "get it." And Tesco needs these shoppers to try the stores if the retailer expects to be successful.

A perfect example of this format confusion, or "muddle" as we call it, happened recently with the City Council in the Southern California city of Rancho Cucamonga, where Tesco is proposing opening a new Fresh & Easy grocery store.

Read the short story below from The Sun, a daily newspaper based in San Bernardino in Southern California's Inland Empire region where Tesco has its Fresh & Easy corporate headquarters and distribution center, an a number of Fresh & Easy stores. We will offer some analysis and comments below the piece from The Sun:

R.C. clears way for specialty market

British concept grocer Fresh & Easy eyeing location near winery building
Wendy Leung, Staff Writer, The Sun, San Bernardino
05/08/2008

RANCHO CUCAMONGA - It's not unusual for new businesses to be scrutinized by those not familiar with their concept.

When the Korean-inspired frozen yogurt chain Pinkberry came on the scene, people couldn't help but ask, "Is this really yogurt?"

Now that the British concept grocer Fresh & Easy is eyeing a location in this city, the question that keeps popping up is, "Is this a supermarket?"

The City Council mulled this query Wednesday and decided - no.

Fresh & Easy - a market with a "think small" approach - wants to open a 14,000-square-foot store on the northeast corner of Vineyard Avenue and Foothill Boulevard, behind the historic Thomas Winery building. The property is zoned speciality commercial, and the Planning Commission ruled in March that the grocer didn't fit that designation.

The City Council, perhaps lured by the display of spinach and artichoke chips and Spanish chorizo brought by the store's representatives Wednesday, overturned the Planning Commission decision by a unanimous vote, saying the grocer is indeed different from typical supermarkets.

Mayor Don Kurth said there isn't any doubt in his mind that Fresh & Easy is a specialty store. Addressing the representatives of the property owner, Kurth said, "I think you've got a home run there."

British retailer Tesco began tapping into the U.S. market last fall and has opened two locations in Upland. More stores are on the way for San Dimas, Fontana and another Rancho Cucamonga location at Haven Avenue and Town Center Drive.

Construction for the Thomas Winery Plaza store is expected to begin at the start of 2009. Property owners intend to demolish the two buildings that currently house Antonino's Ristorante, Yatai Sushi Express and other businesses before constructing a new building that would incorporate winery elements.

Existing businesses will relocate within the plaza because there is 15,000 square feet of vacant property, said Jerry Ogburn, a representative of the property owners.

The Thomas Winery building, with Coffee Klatch and Bobby Baja's as tenants, will not be affected. The historic building is billed as the state's oldest winery and is the reason for the specialty commercial designation.

One of the reasons why the Planning Commission was hesitant to give Fresh & Easy the specialty label is the city has no definition for specialty food stores.

But the council members said after several visits to the Upland locations, they were ready to deem it special.

"I couldn't classify it as a supermarket," said Councilman Dennis Michael. "And if I can't classify it as a supermarket, I have to go with a specialty store."

Ogburn said this is probably the first time that the question of whether Fresh & Easy is a supermarket became a sticking point.

Councilwoman Diane Williams agreed that Fresh & Easy was a specialty store but was far from being a fan.

"If the word specialty means unique...individual, then it doesn't necessarily have to be attractive, it can be ugly," she said. "This isn't ugly but it's certainly not the most attractive store I've ever been in. In fact, it's a real turn-off."

Councilman Rex Gutierrez, who applauded the store's commitment to environmentally friendly designs, attributed the grocer's spartan interior to its country of origin.

"I can understand the plainness," he said. "To me, it's typical English practicality."

Fresh & Easy Buzz Analysis:

Which is it: a food store for everybody? Or is it a specialty store. The mayor obviously thinks it's a specialty store; in fact he seems to have "no doubt in his mind" that's just what Fresh & Easy is.

We wonder why the Fresh & Easy Neighborhood Market representatives--the ones who brought the chips and chorizo--didn't correct the mayor and explain to him that Fresh & Easy is a grocery store for "everyone" just like a supermarket is; that in fact that's the retailer's stated positioning for the format and stores?

Well, probably because the reason the city's planning commission turned Tesco down for the new Fresh & Easy market was because they said the store didn't offer enough of a unique quality to be approved. The city has some sort of "we have enough supermarkets in the city already-oriented planning and design guideline."

Since the mayor was obviously bowled over with the "home run" specialty store aspects of Fresh & Easy--not having a doubt it is a specialty foods store--and a majority of the council felt the same way, thereby overturning the planning commission and approving the store, we would expect the Fresh & Easy representatives attending the meeting decided to leave well enough alone in terms of the format confusion, declare victory and go home.

Now it would be just fine if Fresh & Easy wants to be a specialty store; which as the format is it really basically is. But that's not the strategy or the positioning: the stores are designed to be primary (and to a limited degree secondary) food and grocery shopping venues for "everybody."

Hence the problem, or format confusion or muddle, we've been describing for a long time here on Fresh & Easy Buzz.

As we've said, a good part of this problem has been the failure of Tesco to properly communicate what Fresh & Easy is to consumers. The retailer has relied on public relations "free media" marketing to create its message and communicate its positioning. It hasn't worked.

In order to position and communicate a format such as Fresh & Easy in the desired manner, a retailer must use paid advertising it can control along with public relations-oriented marketing. Why? So it can control it's message and say what it wants and needs to, that's why.

We've also reached another conclusion in our analysis: We don't think Fresh & Easy Neighborhood market executives know what the Fresh & Easy format is. They may have at one time; but not anymore.

Here's one hint why: When Fresh & Easy executives were interviewing new public relations firms in Southern California a couple months ago, among the conflicting charges they gave to those firms was to simultaneously position and gain publicity for the stores as leaders in premium wine and specialty foods sales, restaurant-quality prepared foods purveyors, and the cheapest grocery stores in town. That's conflicting.

Of course, as we've argued previously, in many ways the advertising campaign is putting the cart before the horse, as Tesco has much to do to create a format for the Fresh & Easy stores--as well as in it's operations policies--in order for the stores to be grocery markets "everyone" (or nearly everyone) will be interested in shopping in. That's just not currently the case.

Everybody vs specialty: A few examples:

To be a grocery store for "everybody" in the U.S., you have to take checks. Fresh & Easy doesn't take traditional paper checks, just ATM and credit cards.

If you're operating a specialty foods store it's fine not to take checks.

You also need to cash payroll checks, especially in California, Nevada and Arizona, where many Hispanic immigrant consumers (and others of various ethnic groups use their supermarket as their bank, cashing their payroll checks then buying groceries after at that store every two weeks like clockwork. Ask ("everyman") Wal-Mart why it charges a flat fee of $4 to cash payroll checks regardless of their size, and encourages the practice? Ask Safeway Stores why its stores bring cash in by the armored car load on the 1rst and the 15th of every month, which generally is payroll check cashing time for most of these consumers.

Specialty foods stores hardly ever cash payroll checks, which not only is fine, but also wise.

To be a grocery store for "everybody," you can't have self-service checkout (and only assist shoppers with it if they ask).

For example, people over 65 years old, the fastest growing age group in the U.S., don't generally like to scan and bag their own grocery orders. They also don't like to have to ask for help doing so. Some will ask for help. Some will do it on their own--at least once. Many though will do it once and never return to the store. Others will hear about it and never try Fresh & Easy. With this group being the fastest growing age cohort in the U.S.--and the most affluent--that's a lot of "everybody" to exclude.

If you're operating a specialty foods store or deep discount niche market, it's fine to offer self-checkout, after all you're going after a niche market, not everyone.

To be a grocery store for "everybody," you need to carry more than 30-35% of the already limited assortment grocery items in your stores under national and regional brands, along with your own store brand--especially when that store brand has zero brand equity in the market. As we've suggested before, Fresh & Easy's roughly 65% store brand, 35% national and regional grocery brand mix needs at a minimum to be adjusted to a 50-50 mix.

If you're a specialty foods store like Trader Joe's, it's fine to offer 65% or even more of the grocery products under a store brand since you aren't trying to target everyone anyway.

To be a grocery store for "everybody," you need to offer at least half of all your produce items in bulk, rather than having then 100% pre-packaged. And 50% is being generous. It's probably more like 75%.

If you are a specialty foods store like Trader Joe's, its fine to sell all of your fresh produce pre-packaged because like with Trader Joe's, produce is merely a sideline rather than part of a strategy targeting of targeting all consumers. Trader Joe's doesn't care if shoppers purchase most of their produce elsewhere, although they like it when customers buy most of it at their stores.

There's a form of cognitive dissonance going on at Tesco about what Fresh & Easy really is at present and what they want it to be (and their stated strategy for it), in our analysis.

The format, marketing, merchandising and retail operations all scream specialty foods store. But the strategy and investment is one of a grocery store for all consumers: a combination basic grocery and fresh foods store with everyday low prices that is designed to be the primary and to a limited extent secondary food and grocery shopping venue for consumers in the stores' market regions.

There are numerous other examples--and you can find them throughout Fresh & Easy Buzz--of format, merchandising and operational changes which in our analysis Tesco needs to make and evolve in order to make a success of the small-format, convenience-oriented for "everyone" Fresh & Easy grocery stores; unless of course they want to reposition them as specialty foods stores, which the mayor of Rancho Cucamonga would say would be a "home run."

Tesco Fresh & Easy Marketing Chief Uwins to Speak at Upcoming Nielsen Company 'Consumer 360' Conference in Phoenix, Arizona

A shopper pushing a grocery cart down the aisle in one of Tesco's Fresh & Easy Neighborhood Market grocery stores. The small-format stores average about 10,000 -to- 13,000 square feet. To date, Tesco has focused primarily on using in-store or shopper-oriented marketing for its Fresh & Easy USA grocery stores. (Photo: Courtesy: Fresh & Easy Neighborhood Market.)

Simon Uwins, the chief marketing officer for Tesco's Fresh & Easy Neighborhood Market USA small-format, convenience-orieted grocery store chain, will be a speaker at the upcoming Nielsen Company (market research firm) annual consumer 360 conference which will be held in Phoenix, Arizona June 3-5.

According to Nielson Company, Uwins will present "The Story of Fresh & Easy," a presentation highlighting how "Tesco brought its philosophy of creating value to the U.S."

Uwins "will discuss how Tesco used research to determine how it would create value for customers in the United States, as well as how Tesco is performing with the creation of the brand, the stores, and the company," according to Nielsen.

That part of Uwins' talk should be interesting in terms of the various mixed scenarios currently in the markeplace and in the financial markets regarding the relative sales performance of Tesco's small-format, combination basic grocery and fresh/specialty foods-oriented stores.

Tesco currently has 61 Fresh & Easy Neighborhood Market grocery stores open in Southern California, the Phoenix Metropolitan/East Valley region in Arizona, and in the Las Vegas, Nevada Metropolitan area.

The grocery chain plans to open about 6 stores in the Bakersfield area in California's Central Valley, 18 stores in Northern California's San Francisco Bay Area, and 19 stores in the Sacramento Metropolitan area in Northern California beginning early next year.

Tesco also continues to open new stores in Southern California, Arizona and Nevada. The grocer says it plans to have at least 150 of the small-format, convenience-oriented Fresh & Easy stores open in those three market regions by the end of this year. Originally, Tesco estimated it would have 200 stores open by the end of 2008.

As we reported here in late March, Fresh & Easy Neighborhood Market is currently taking a three month new store opening pause--from April to the end of June--but says it will resume its rapid new store opening schedule again beginning in July, and running until the end of the year.

In order to have 150 stores open and operating by the end of 2008, Tesco will need to open 89 new stores in the the six month period from July to December, 2008. This works out to opening a new store about every 2.5 days. Fresh & Easy opened new stores at about that pace between late October, 2007, when the first grocery store opened in Hemet in Southern California, to early April, 2008, when the 61rst Fresh & Easy grocery market opened.

The Nielsen Company's annual Consumer 360 conference is one of the consumer packaged goods industies top events. It's usually attended by over 1,000 CPC and retailing industry executives and others.

This year's conference will be held on June 3-5 at the JW Desert Ridge Resort and Spa in Phoenix.

Other speakers and topics at the conference with a retail focus include:

>Lisa Kauser, vice president consumer and consumer solutions, Unilever North America. Her presentation is titled: "Shopper Showdown: How to Thrive in the New Economy." In her talk, Ms. Kauser will explore how consumers are evolving their shopping behavior and adjusting store and brand choices to offset increasing food and retail prices, according to Nielsen.

>Anne Mooney, associate marketing director, Proctor and Gamble; Mike Hess, global research director for research firm OMD; and Jack McGauley, manager of consumer research for Missouri-based regional supermarket chain Schnucks, will present a panel discussion titled: "The Evolution of the Store As a Marketing Medium."

In the discussion, the panel will talk about the growth of "shopper marketing," as well as present a model of "shopper marketing," including introducing new industry metrics and standards for evaluating the effectiveness of in-store marketing, according to Nielsen.

For more information about the conference, including additional educational sessions, topics and speakers--as well as obtaining registration information--you can check out the Nielsen Consumer 360 Conference website here.