'They're Back' in Full-Force: Tesco's Fresh & Easy Adds New $6-Off Online Coupon to Just-Recently Direct-Mailed $6-Off Coupon; Tough to 'Terminate'

News & Analysis: Fresh & Easy's Deep-Discount Store Coupons

On May 1, 2009 Fresh & Easy Buzz reported that after taking a break from regularly distributing its $5-off (purchases of $20 or more) and $6-off (purchases of $30 or more) deep-discount store coupons for most of February, March and part of April (2009), Tesco's Fresh & Easy Neighborhood Market direct-mailed a $6-off store coupon good for nearly one month to consumers in neighborhoods surrounding its 120 Fresh & Easy grocery and fresh foods stores in California (Southern and Bakersfield), southern Nevada and Metropolitan Phoenix Arizona.

[Read our May 1, 2009 story here: Fresh & Easy Brings Back $6-Off Deep-Discount Store Coupon; Latest Version Good For Nearly One Month; New Promo Strategy Didn't Last Long.]

Tesco's Fresh & Easy has now followed-up on that household direct-mailed store coupon drop by offering one of the $6-off purchases of $30 or more store coupons on its freshandeasy.com Web site. The online coupon is here. The store coupon was posted yesterday on the Web site.

The $6-off online deep-discount coupon is good until May 10. As mentioned, the $6-off store coupon in the flier distributed on April 28 is good until May 25, 2009.

Tesco's Fresh & Easy also is promoting the online coupon's availability using its Twitter.com feed. For example, below are two promotional "Tweets" informing its fresh_and_easy Twitter followers of the coupon's posting on the Web site:

>This promotional "Tweet" is from yesterday, Wednesday, May 6:
Dont forget your coupons this week! http://tinyurl.com/dhb3snabout 23 hours ago from Netvibes.

>And this one is from earlier today:
@DollhouseCSMTCS did you get the latest coupon in the email? http://tinyurl.com/dhb3snabout 7 hours ago from Netvibes in reply to DollhouseCSMTCS.

Based on the fact Tesco's Fresh & Easy distributed a paper version $6-off store coupon on April 28 via direct-mail, which is good for nearly a month until May 25, along with it's now promoting of the online $6-off purchases of $30 or more store coupon good until May 10, it appears the grocer is back in the store coupon game in full force.

Store coupons and everyday merchandising

As we previously reported, Fresh & Easy was trying to wean itself off of the regular use of the deep-discount store coupons, the use of which for many shoppers has become a regular part of their Fresh & Easy grocery shopping behavior.

For all or most of February, March and April the grocer didn't distribute any of the deep-discount store coupons via direct snail mail, which is a practice Tesco's Fresh & Easy has done regularly since the first stores opened in November, 2007.

Instead, the grocery chain issued just a few online coupons good for no more than three days -to- one week in duration. We are aware of no more than three online store coupons being distributed from February -to- early April 2009.

Fresh & Easy's marketing people also told consumers requesting the discount store coupons on its company Blog and Twitter feed that it was no longer regularly distributing the coupons as it had been in the past, saying on more than one occasion that it was now something the grocer would do infrequently, if at all.

Tesco's Fresh & Easy also changed its advertising flier, which it posts as an online version on its Web site and direct-mails (paper version) to residential households, from a once-every-three-week promotional vehicle to a weekly flier on March 4. As part of that change the grocer has offered hotter promotional prices in its now weekly advertising flier since March 4, compared to the promotional offerings prior to that.

This strategy -- going to a weekly advertising flier (which is something Fresh & Easy Buzz suggested over a year ago, by the way) and offering deeper-discount promotional price-points on the advertised items in the flier, clearly was an attempt by Tesco's Fresh & Easy to change its strategy from the chronic use of the deep-discount store coupons and instead put the focus on the weekly advertising flier and hotter-priced promoted items in the flier. [March 11, 2009: Fresh & Easy Buzz Redux: Tesco's Fresh & Easy Changes its Promotional Advertising Flyer to 'Weekly;' Something We've Been Suggesting For About A Year.]

The overall promotional merchandising strategy in doing this being to go from offering an across the board discount (a certain percent off whatever is purchased) -- the store coupons -- to a more item-based promotional scheme, similar to what nearly all of its competitors do.

But with the distribution of the $6-off paper store coupon good for nearly one month, along with the now online $6-off coupon, it appears that strategy isn't producing sufficient sales for Fresh & Easy. Why else go back to the discount coupons, including issuing one good for nearly a month, which is seldom if ever done in the retail grocery business.

On the rare occasions when grocers do issue such coupons, they almost always are good for three or four days only. (Duration is a key element in "promotion.") This is the case because the purpose of such coupons is to (1) stimulate sales over a short period of time and (2) to serve as a promotional vehicle to bring new customers into grocers' stores.

Whenever a food retailer issues such a coupon for such a long period of time -- three weeks, four weeks -- it generally means that grocer has a strong need to create sales and therefore decided to do so using the short-term device of a deep-discount store coupon. The use of deep-discount store coupons are considered a "quick fix" promotion (read need sales) in the retail food and grocery industry.

It's important to note that such coupons aren't really marketing vehicles, as their complete focus is on price.

Consumer perception and pricing realities

Additionally, when such coupons are used regularly by a grocer, and have long expiration dates on them, that grocer creates a perception among shoppers that the coupons are a part of the retailer's overall merchandising practice; that without the coupons perhaps that grocer's everyday prices are just too high. Consumers' perceptions are reality, even if incorrect.

It's our analysis, as we written about before in Fresh & Easy Buzz, that Tesco's Fresh & Easy has done just that with its regular use of the deep-discount store coupons: It's created a perception among a significant segment of its shoppers that the coupons are needed in order to gain value in the form of good prices at the stores.

The reality is that when there are no Fresh & Easy deep-discount store coupons, sales go down and shoppers complain to the retailer about the lack of coupons.

This is a self-inflicted problem for Fresh & Easy. The grocer created the perception and thus problem by its chronic distribution of the store coupons.

Evidence of this shopper perception is that from February -to- early April numerous customers complained to Fresh & Easy via its company Blog and on Twitter.com about the lack of the coupons. The record is there.

Shoppers also complained about it on other Blogs such as the one written by Orange County Register reporter Nancy Luna. Her popular Blog is called the "Fast Food Maven." In fact, even Ms. Luna complained to Fresh & Easy about the lack of the store coupons during that period, perhaps offering a voice for her readership in Southern California's Orange County. [Have a read here, for example.]

Tesco's Fresh & Easy responded to these numerous shopper complaints by offering online coupons good for a few days at a time a few times in February and March. It's clear by following the Blog and Twitter trail that doing so was a response to the coupon-less shoppers' complaints.

It's our analysis that with its latest round of $6-off store coupons, Tesco's Fresh & Easy will find itself in a bind -- well an even tighter bind than it already is in regarding the store coupon issue. The previously unhappy store coupon-hungry shoppers are now being satisfied with a new round of $6-off coupons. But that will only make the customers hungry for more when these expire.

Seeing that Fresh & Easy has issued this new coupon round, including the $6-off store coupon good for nearly one month, shoppers are likely to think that once again the deep-discount store coupons are back as a regular feature at Fresh & Easy. And perhaps they are?

But if they aren't back as a regular feature at the grocery and fresh foods chain, it isn't going to take long, perhaps a month without any of the coupons, for that shopper-base to once again voice its complaints via the Blogs and on Twitter. One Fresh & Easy Buzz reader e-mailed us about the lack of the store coupons in February, calling them "Coupon Crack," for example. He wanted them now.

No-frills, low price model: Why deep-discount coupons?

If a shopper buys the $30 minimum purchase using the $6-off store coupon, that's a 20 percent discount off the regular price of the items that comprise grocery order. That 20% comes out of Tesco Fresh & Easy's margins.

In the penny-profit food retailing business a grocer can only do a couple things if it's regularly giving shoppers 10% -to- 20% off of their store purchases: It can raise the everyday prices in its stores to make up the difference, it can figure out a way to cut costs to achieve that percent difference, or it can do some combination of the two. In reality doing so is impossible.

{We did notice in Fresh & Easy's weekly ad flier that ended yesterday that the grocer was promoting a number of items at higher prices than it has recently, prior to issuing the store coupons. An example is the Buxted store brand Boneless, Skinless Chicken Breasts, which in the just-ended ad flier were priced 20-cents per pound higher (still a decent promotional price at $1.97 pound though) than they were in two or three previous fliers, when they ran the chicken breasts at $1.77 pound. Perhaps this is because of the discounts represented by the deep-discount store coupons? The April 28 $6-off coupon was distributed that same week.}

The entire deep-discount store coupon fixation situation is particularly odd for Tesco's Fresh & Easy because its positioning with the small-format grocery and fresh foods markets is as a convenient, no frills, everyday low-price-focused neighborhood grocery market. That's the model.

Tesco has touted that Fresh & Easy's prices are about 15% lower everyday than those at supermarkets operated by its competitors in California, Nevada and Arizona. Does that mean with the $6-off coupon the prices are now 35% cheaper than the competitions, assuming a shopper buys the $30 coupon purchase minimum?

You see the problem. Why does a food and grocery retailing model or format (Tesco's Fresh & Easy) that is no frills, low price need (or want to) to regularly distribute deep-discount store coupons to get sales? Hint: It's not because of the recession.

Fresh & Easy does have good everyday prices in its stores. It's competitive on price with its retail competitors across the board. But it has gotten itself into a position where it must regularly distribute deep-discount store coupons worth up to 20%-off a total grocery order purchase in order to get sales.

That's a problem. And the root of the problem has to do with the Fresh & Easy format itself, the retailer's operations practices, and its merchandising and marketing, more so than it does with the current economic recession, in our analysis. [March 7, 2009: Analysis & Commentary: The Seven Retail Operations Changes Tesco's Fresh & Easy Neighborhood Market Needs to Make to Help it Get On the Success Track. 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.]

Bringing back the $6-off store coupons with such a long expiration date -- from April 28 -to- May 25 -- plus adding an online version good until May 10 -- suggests to us that the deep-discount store coupon isn't going away anytime soon at Tesco's Fresh & Easy.

Fresh & Easy shoppers are delighted, and they should be, it's their job to get the best deals they can on groceries in these difficult economic times. They need not and should not concern themselves with retailer margins, sales and the like. That's not in the grocery shoppers' manifesto.

But we find it hard to believe that the senior management at Tesco isn't aware of the bind it has gotten itself into with the chronic use of the deep-discount store coupons.

No other grocery chain uses them anywhere near as frequently as Fresh & Easy has and does. In fact, most grocers don't use the coupons at all, for the reasons described above. They are margin killers and should only be used as short term promotional tools. And of course they create dangerous consumer price perceptions when used chronically like Tesco's Fresh & Easy has.

Perhaps Tesco hopes that once it gets its Fresh & Easy stores closer their sales targets (about $200,000 per store per week in average sales), if it does, that it can then just stop distributing the deep-discount store coupons completely.

That could happen. But only if the retailer comes up with a solid, comprehensive merchandising, marketing and promotional plan that positions the stores in a way that shoppers want to shop at them even without the regular availability of the $5-off and $6-off store coupons.

Since average sales per store are nowhere near that $200,000 per store per week target at present with the regular deep-discount store coupon distribution, Tesco's Fresh & Easy has a long road to travel in order to eliminate the use of the coupons, something it said in February of this year it was essentially doing.

But the store coupons are back -- and in full force -- online and via direct mail.

And it's our analysis that although the retailer will likely try to hold back on distributing the $5-off and $6-off deep-discount store coupons for as long as it can after the current $6-off coupon expires on May 25, it won't do so for very long.

And the funny thing is that by issuing a store coupon like that for so long of a shelf life, nearly a month, it's actual power as a promotional vehicle is greatly reduced. As we said earlier, duration (or time) is a key element in any promotion, including store coupons.

The idea behind using such coupons is to give shoppers a limited amount of time -- three days, four days, a week tops -- to use the coupons so that they will rush to a grocer's stores and save money. If you snooze... you lose.

In contrast, a nearly four week expiration date, like is the case with the $6-off Fresh & Easy store coupon that runs until May 25, allows for plenty of shopper snoozing before using. And the coupon's long duration builds an expectation on the part of shoppers that the coupons are a normal part of a retailer's merchandising practice. Why issue a coupon for almost a month if its is something special?

Coupons going to be tough for Tesco to 'Terminate'

Since Tesco's Fresh & Easy wants to eliminate the store coupons, and attempted to earlier this year, it's clear its desire isn't to have them as a part of the its normal course of doing business, despite distributing them in a way that says the opposite. Maybe the coupons are "Fresh & Easy senior management crack," as well as shopper "coupon crack," as our e-mailer referred to the $6-off store coupons?

It will be interesting to observe what happens after the latest deep-discount store coupon expires on May 25.

We're rather certain of this though: To paraphrase current Governor of California and former Hollywood movie star Arnold Schwarzenegger's famous catch phrase -- "I'll Be Back" -- from the movie "The Terminator" -- after May 25 the Fresh & Easy deep-discount store coupons "Will Be Back."

[Follow Fresh & Easy Buzz around on Twitter.com at www.twitter.com/freshneasybuzz.]

Fresh & Easy Brings Back $6-Off Deep-Discount Store Coupon; Latest Version Good For Nearly One Month; New Promo Strategy Didn't Last Long

Grocer Promotions: Discount Store Coupons

Tesco's Fresh & Easy Neighborhood Market has resumed distributing its deep-discount store coupons by direct mail to residential households located in the neighborhoods surrounding its 119 small-format, convenience-oriented combination grocery and fresh foods markets in California (Southern and Bakersfield), southern Nevada and Metropolitan Phoenix, Arizona.

Fresh & Easy mass-mailed a supplemental promotional flier this week (most residents received it on Tuesday, April 28) that contained one of its $6-off total purchases of $30 or more store coupons. The store coupon is good until May 25 -- which makes its duration nearly a month long -- which is unusual even for Fresh & Easy, since most of its recent past coupons were good for about two weeks maximum.

The promotional flier contains some brief advertising copy and photographs of various products, with the $6-off discount store coupon being the centerpiece.

The ad copy says:

We're a neighborhood-sized market that's quick and easy to shop

*Budget prices
*fresh and wholesome foods
*all your favorite brands
*a variety of prepared meals

This is the same ad copy the grocer has used in its direct-mailed, paper store coupon supplemental promotional fliers in the past.

The advertising flier also has pictures of various food and grocery products on it: milk eggs, Bertolli brand Pasta Dinners, chicken, bell peppers, avocados, strawberries, Corona Beer, Trix brand Cereal and fresh flowers.

The supplemental promotional flier was mass-mailed in addition to and separate from Fresh & Easy's regular weekly advertising flier, which it direct-mails to residences each week.

Bringing back the direct-mailed store coupons

As we previously reported, Tesco's Fresh & Easy stopped distributing its deep-discount store coupons via direct snail mail in February of this year. Prior to that the grocery chain distributed the fliers often and regularly using similar paper fliers, along with posting the store coupons often at the same time on its Web site.

In fact, since February, with the exception of issuing a couple online store coupons good for just a few days at a time, Fresh & Easy hasn't distributed the discount store coupons at all over the last three months.

Instead, beginning in early March, the grocer changed the frequency of its mass-mailed paper and Web site-based advertising flier from a frequency of once-every-three-weeks to one-a-week, like all of its competitors' in California, Nevada and Arizona offer. [See our March 11, 2009 story here: Fresh & Easy Buzz Redux: Tesco's Fresh & Easy Changes its Promotional Advertising Flyer to 'Weekly;' Something We've Been Suggesting For About A Year.]

Tesco's Fresh & Easy also has offered more items at better promotional prices since going to the weekly advertising flier duration in early March than it did prior to that.

However, since the grocery chain stopped issuing its store coupons on a regular basis in February of this year -- in the past it issued them nearly every couple of weeks -- it's received numerous comments and complaints for customers via its corporate Blog and on its Twitter.com feed. Many customers have said they want the store coupons on a regular basis like in the past.

Over the last couple months there's been communication from customers wanting the coupons and the Fresh & Easy Neighborhood Market marketing people who run the Blog and Twitter site, both of which we monitor regularly. Fresh & Easy's marketing folks responded a couple times to the customers by issuing online store coupons good for three -to- four days, and then announcing the availability of the coupons, with a link, on its Twitter.com feed and on the company marketing Blog.

It appears Tesco's Fresh & Easy has now decided not to do away with the store coupons completely, particularly distributing them via the supplemental direct mailed paper fliers, as the grocery chain's senior management hoped it could.

We don't expect Fresh & Easy to issue the store coupons at the same frequency that it did from November 2007, when the first stores opened, until January, 2009, though. That frequency was so frequent that shoppers became so used to the deep-discount coupons that many wouldn't shop at the stores without one. Of course, we could be wrong.

Additionally, up until the end of 2008 Fresh & Easy distributed the coupons liberally in its stores. It was the norm to give each shopper one or more of the $5-off (purchases of $20 or more) and later $6-off (purchases of $30 or more) store coupons regardless of the dollar amount of grocery purchases they made in the stores. We received three of the coupons a few times after buying about $15 -to- $20 worth of items, for example.

Tesco's Fresh & Easy started cutting back the number of coupons it gave out in the stores in the fall of 2008, much to the chagrin of customers. By the end of last year most of the stores were no longer handing out the coupons, although we've seen a few stores that still have them on occasion to give out to shoppers.

Once Fresh & Easy stopped the store-level distribution of the coupons, shoppers increasingly were asking for them via direct mail and online. In January of this year the grocery chain distributed the discount store coupons via direct-mailed fliers at least twice in the month. But beginning in February it stopped doing so, likely in anticipation of the launch of its weekly advertising circular featuring hotter than in the past promotional prices, a few weeks later in early March.

Fresh & Easy store coupons: Now what?

It will be interesting to see how Tesco's Fresh & Easy handles the store coupon situation now. The new $6-off store coupon is going to once again wet the appetites of the store coupon-hungry Fresh & Easy customers. It should also draw some new shoppers into the stores.

The problem is those same core Fresh & Easy shoppers, the ones who have become used to the coupons, will be looking for another deep-discount store coupon soon after this one expires on May 25. The" coupon crack is back," is what one happy Fresh & Easy coupon-shopper said to us in an e-mail.

Store coupons as promotional vehicles

And the fact that the current store coupon is good for such a long period of time -- expires on May 25 -- seems to indicate a need for the grocery chain to stimulate sales.

Normally in the retail grocery business, as we've written about before, such deep-discount store coupons are good for maybe three to four days -- and one week at the most, when they are used at all -- which is very infrequently and by few retailers.

Early this year, supermarket chains Safeway, Sacramento-based Raley's and Whole Foods Market all issued store coupons. But those respective grocers' discount store coupons were good only for three days in duration. [February 2, 2009: Competitor News: Safeway Stores, Inc. Enters the Store Coupon Derby in Southern CA, Nevada, Arizona; Part of Extending its 'Value Proposition'.]

The reason for this is that the store coupons are used as a promotional device. As such, they are primarily designed to stimulate sales over a short period of time, such as from Friday -to- Sunday, which are the prime grocery shopping days for consumers, and thus the most competitive for food retailers.

The danger in issuing deep-discount store coupons to often and with too long of a per coupon shelf life -- like a two or three week expiration date -- is that shoppers come to think of such coupons as a regular part of a grocer's way of doing business and pricing structure; that the only time groceries are reasonably priced in its stores are when the retailer issues these store coupons, even if that's not the case, as it is at Fresh & Easy, which has good everyday prices.

But perception is reality when it comes to consumers. Think about that "coupon crack" comment the reader-Fresh & Easy coupon-shopper made. And by issuing the coupons so frequently, Tesco's Fresh & Easy has actually created this perception via its marketing.

Store coupons and grocer margins

As we've said before, most grocers also set the minimum purchase amount of such coupons much higher than $30. For example, when Safeway and Raley's issued their respective three day duration store coupons early this year, the minimum purchase amount for both chains was $50. Safeway offered a store coupon good for $10-off purchases of $50 or more (a 10% savings). Raley's offered two versions -- one good for $10-off $50 (10%-off) or more and a second coupon with a value of $25-off purchases of $100 or more (25%).

The logic and practice in the industry is that the higher the minimum purchase, the higher the percentage off you can go. Within reason of course.

For example, Raley's $25-off $100 coupon offered a savings of 25%-off, 5% more than the $6-off $30 Fresh & Easy coupon does. But Raley's minimum purchase to use the coupon is $70 higher than the $30 Fresh & Easy $6-off store coupon minimum.

This is important because another key purpose of deep-discount store coupons is to increase the market basket size (total customer dollar purchase during the shopping trip) of what a shopper purchases. Giving 5% more on a minimum that's $70 more than the Fresh & Easy coupon's $30 minimum purchase pencils out OK for a grocer, particularly when the coupon is only good for three or four days. A 5% difference on a sale of $70 more is workable, as long as the exposure isn't for multiple weeks.

The percent discount on store coupons comes out of the retailer's margins. That is unless of course the grocery chain comes up with a store coupon promotion like Safeway Stores' is now conducting, which is funded mostly using promotional funds contributed by its suppliers. [Read our April 28, 2009 story here: Competitor News: Safeway Leverages Supplier Promo Monies to Fund 'Living Well Feeling Great' $10 Store Coupon On $30 Purchase Promotional Program.]

Safeway hasn't issued any additional direct discount store coupons since the first of this year. Instead it created the promotion described above, which it's been running for a number of weeks now. It end in early May.

Retailer-issued store coupons and margin erosion

Now that Tesco's Fresh & Easy is running a weekly instead of every-three-weeks advertising flier, along with offering hotter promotional price points on the advertised items in the flier, it risks eroding margins considerably if it does this and issues the deep-discount store coupons on any regular basis at the same time, particularly for three week-plus durations like the present $6-off store coupon is for. That's why we would find it very strange from an experiential and analytical standpoint if the grocery chain goes back to its old frequency -- basically all the time -- of issuing the store coupons.

However, the fact that the current $6-off purchases of $30 or more Fresh & Easy discount store coupon runs for nearly a month (doesn't expire until May 25) leaves us wondering. That's a long period of time for a grocery chain to have such a coupon out there in the market from a margin erosion standpoint, especially in conjunction with weekly item discount promotions.

But we suspect the three-plus week shelf life of the coupon is going to please the many Fresh & Easy shoppers who told the grocer it wanted the deep-discount store coupons back, and that without the store coupons they weren't shopping as frequently (or at all) at or purchasing as much in the Fresh & Easy stores.

The main problem with such coupons is that they put too much of an emphasis on price discount over other forms of merchandising and marketing. And since Fresh & Easy has already trained shoppers to rely on these coupons, even though the everyday prices in the stores are good, it runs the risk of further creating a shopper class that perceives the stores as only offering good prices when the deep-discount store coupons are distributed.

We thought Fresh & Easy figured this fact out when it stopped the regular practice of issuing the store coupons in February and switched to a more item-focused promotional scheme with the weekly ad (launched on March 4) and hotter promotional price points.

But clearly that hasn't worked thus far from a store sales volume standpoint. If it had there would be no need to issue a $6-off coupon good for nearly a month. Good for three -to-four days, fine. That's a promotion. But good for nearly a full month? That's a sales salve, even in a recession.

Retailer-issued deep-discount store coupons like Fresh & Easy's can play havock with a grocery chain's gross margins when used frequently because the discount amount comes out of the retailer's margins, as we've said. Tesco PLC didn't report the full-year gross margin for Fresh & Easy when it reported its sales and profits on April 21. Instead it put n/a (not available) in the gross margin column in its published section for Fresh & Easy. [For the details see: Tesco PLC Reports Record Sales and Profits; But Takes £142 Million ($208.05 Million U.S.) Loss For Fresh & Easy Neighborhood Market USA.]

Customers happy campers though

But we know the Fresh & Easy shoppers will be happy. After all, they rightly need not concern themselves with things like margin and break-even. [Read - April 21, 2009: Tesco PLC Reports Record Sales and Profits; But Takes £142 Million ($208.05 Million U.S.) Loss For Fresh & Easy Neighborhood Market USA.]

Their goal and a grocery shopper's job-one is to get the best deal he or she can on groceries. And with the $6-off purchases of $30 or more discount store coupons, combined with the everyday prices and advertised promotional prices at the Fresh & Easy stores, that works out to a very affordable deal on food and groceries -- for shoppers that is.

Related stories and posts:

>January 27, 2009: Tesco Fresh & Easy's 'New' Advertising Flyer: Minimalism Without Thought or Design Does Not A Retail Advertising Communications Piece Make

>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?

.March 7, 2009: March 7, 2009: Analysis & Commentary: The Seven Retail Operations Changes Tesco's Fresh & Easy Neighborhood Market Needs to Make to Help it Get On the Success Track
>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.

September 26, 2008: Tesco's Fresh & Easy Neighborhood Market Experiments With A $1-Off Online Discount Coupon; But its Paper Coupons Offer More Than Twice the Value

>Monday, February 2, 2009: Competitor News: Safeway Stores, Inc. Enters the Store Coupon Derby in Southern CA, Nevada, Arizona; Part of Extending its 'Value Proposition'

>Tuesday, February 3, 2009: Competitor News: 'Grocer-Gone-Wild:' Arizona's Fry's and its 'Bring it On' 'Take All Competitors' (Including Tesco's Fresh & Easy) Store Coupon Move

>January 30, 2008: Breaking Buzz: Tesco's Fresh & Easy Distributes its First Promotional E-Mail Alert Today; Has the Grocer Been Reading Fresh & Easy Buzz This Week?

>December 22, 2008: Marketing: Tesco's Fresh & Easy Launches E-Mail Promo Alert Program; Something Fresh & Easy Buzz First Suggested it Do Many Months Ago

>April 5, 2009: Food & Grocery Retailing in the 21rst Century: New Study Says Younger Consumers Getting Hip to Online Coupons; Particularly Mobile Couponing

>March 19, 2009: Ground Control to Shopper: Point-of-Purchase-Based Mobile Couponing the Next Hot Ticket; Kroger Co. Leading the Food Retailing Pack.

>March 9, 2009: Consumer Use and Retailer Redemption of Manufacturers' Coupons Soaring Says Leading Redemption Company in the U.S.; But Not at Tesco's Fresh & Easy

>March 7, 2009: Google & Yahoo - The Tale of the Search Engines: An Analysis of How Tesco's Fresh & Easy is Losing Out By Not Accepting Manufacturers' Grocery Coupons

>February 12, 2009: Consumer Use of Manufacturers' 'Cents Off' Coupons Continues to Grow: The Latest American Rage: Home Coupon-Clipping and Coupon-Trading Parties

>April 10, 2009: Got Milk? Getting it For Shoppers is Much Less Expensive Now Than it Was A Year Ago in California, Nevada and Arizona; Tomorrow it's Even Free

>December 6, 2008: Use of Manufacturers' Coupons Soaring Among U.S. Consumers; Coupon Delivery Systems Going High-Tech; But Fresh & Easy Stores Don't Accept the Coupons

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

>August 24, 2008: Sunday Supplement: 'America's Cheapest Family' Helping to Spur Increased Use of Manufacturers' Coupons At the Grocery Store; Accept At Fresh & Easy

>April 28, 2009: Competitor News: Safeway Leverages Supplier Promo Monies to Fund 'Living Well Feeling Great' $10 Store Coupon On $30 Purchase Promotional Program

>April 12, 2009: Online Grocery Coupon Use Soaring; Coupons.com Reports Whopping 192% Increase ($57 Million) in Value of Coupons Printed in March 2009 Over March 2008

>March 11, 2009: Fresh & Easy Buzz Redux: Tesco's Fresh & Easy Changes its Promotional Advertising Flyer to 'Weekly;' Something We've Been Suggesting For About A Year

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

March 11, 2009: A Fresh Freebie: Tesco Fresh & Easy Offering Online Coupon Good For Free Reusable Canvas Shopping Tote Bag

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

[Follow Fresh & Easy Buzz around on Twitter.com at www.twitter.com/freshneasybuzz.]

Consumer Use and Retailer Redemption of Manufacturers' Coupons Soaring Says Leading Redemption Company in the U.S.; But Not at Tesco's Fresh & Easy

Inmar Inc., the leading promotions transaction settlement provider in the U.S., said late last week that manufacturers' "cents-off" coupon redemption in the fourth quarter of 2008 grew nearly 10%, compared to the fourth quarter of 2007, making it the first jump in redemption since the early 1990's.

Inmar operates one of the leading U.S. clearinghouse operations for the redemption of manufacturers' coupons by retailers and the payment to those supermarket and other format retailers by the manufacturers'-marketers.

According to data just released by Inmar, consumer response to manufacturers' coupons remained strong for 2008, with 2.6 billion coupons redeemed, the third year in a row at that level.

The peak year for coupon redemption was 1992, at the end of the last major recession, when 7.9 billion coupons were redeemed, Inmar says. [Fresh & Easy Buzz thinks 2009 could come comparatively close to that number. It won't be 7.9 billion because manufacturers aren't distributing coupons in the same volume as they were in the late 1980's-early 1990's. However, we bet when 2009 is over the total redemption amount will be much higher than 2.6 billion.)

"Consumers responded to the financial uncertainty (in 2008), in part, by using more coupons," says Bob Carter, president of Inmar CMS Promotion Services. "When everyone started hearing reports of record unemployment, drops in consumer confidence and losses on Wall Street, coupon redemption volume started to go up."

CMS Promotion Services is the brand solutions and promotions arm of Inmar.

The first three quarters of 2008 saw coupon redemption dip slightly, compared to the same three quarters in 2007, according to Inmar's data.

But manufacturer-issued food, grocery and non-food item coupon redemption surged up by nearly 10% in the fourth quarter of 2008, compared to the fourth quarter in 2007.

That increase came in November and December which both saw double digit redemption growth.

A double-digit increase in the use of food coupons primarily drove the jump in redemption, although non-food coupon redemption also rose by nearly 10%, Inmar says. [Note: This compares to the search trends by consumers we analyzed and published in this piece on March 8:

The increase in coupon use also accompanied an unprecedented shift in the channels in which consumers used coupons, according to Inmar.

"For years, nearly 70% of coupons were redeemed in conventional supermarkets," says Jennifer Mauldin, president of Inmar Carolina Services Revenue Recovery Services. "But in 2008, the mass-merchandiser channel saw a 15% increase in redemption overall, made up by a 20% increase in redemption for food coupons and a 13% increase in non-food coupons."

Inmar's Carolina Services Revenue Recovery Services processes coupons and manages third party pharmacy claims for retailers.

The majority of non-food coupons issued by manufacturers are for items like household cleaning supplies and essentials (toilet tissue, paper towels, cleaning products) and health and beauty care category items (vitamins, OTC drugs, body care products) that are sold in supermarkets, mass-merchandise stores and drug stores.

The mass-merchandiser channel includes retailers such as Wal-Mart, Target and Costco, all three of which accept manufacturer-issued coupons for food and non-food items.

Every major (and most minor) food, grocery and related format retailers in the U.S. accepts manufacturer-issued "cents-off" coupons in their respective stores.

Tesco's Fresh & Easy Neighborhood Market does not accept manufacturers' coupons at all in any of its stores in California, Nevada and Arizona, which currently number 115. Since Fresh & Easy is owned by the third-largest retailer in the world, Tesco, which also is the number on retailer of food and groceries in the United Kingdom, is qualifies in the major retailer category mentioned above.

Supermarkets and grocery stores still remain the top retail channel for the redemption of manufacturers' coupons, with about 64% of all coupons being redeemed in the channel, according to data provided by Inmar, which is based in Winston-Salem North Carolina.

However, coupon redemption is growing in the mass-merchandiser channel, largely because the mass-merchandiser channel is a fast-growing seller of food and groceries. About 19% of manufacturers' coupons are now redeemed in the mass-merchandiser channel, according to Inmar's data.

The remaining percentage of coupons are redeemed from other retail classes of trade, such as the drug store channel, and others.

Much of this growth in the mass-merchandiser retail channel in 2008 can be attributed to the fact that more and more shoppers have been turning to the channel, particularly to Wal-Mart, but also to other mass-merchandisers like Costco, to buy their food and grocery items, taking the manufactures' coupons with them to those stores.

Based on our research and analysis, it's not that fewer shoppers are using the coupons at supermarkets. Rather, it's the fact that over the last few years the mass-merchandiser channel has gain a much bigger share of the overall food and grocery (and non-food) consumer dollar. This therefore is reflected in the growth in coupon redemption for the channel.

For example, the overall number one retailer of food and groceries in the U.S. today is a mass-merchandiser, Wal-Mart. The number two seller of food and groceries nationally in the U.S. is Costco, also a mass-merchandiser, with a membership club store specialty. Kroger Co., the largest supermarket chain in the U.S., now comes in as number three. Just two years ago Kroger was the overall top-retailer of food and groceries in the U.S., and Supervalu, Inc. (now number four) and Safeway Stores, Inc. (now number five), were both in front of Costco.

Inmar CMS Promotion Services' president Bob Carter says food and grocery manufacturers'-marketers continue to believe in the power of coupons, proven by a 5% increase in the number of coupons made available to consumers last year. "At 317 billion coupons, distribution is not just up over the previous year, but is back up to levels from a decade ago," Carter says.

"This high level of (manufacturer-issued coupon) distribution, combined with a 9% increase in the average face value and a generally sour economy, make coupon offers more attractive to consumers than ever," says Carter.

As Fresh & Easy Buzz has been writing about and offer analysis on in a variety of pieces over the last many months, all of the empirical evidence out there demonstrates that Bob Carter is correct; that the use of manufacturers' "cents-off" coupons by consumers will continue to increase, and do so significantly.

To demonstrate this point, Inmar's Carter says current data shows consumers' use of manufacturers' coupons increased substantially in January, 2009, over January, 2008. Over 9% more manufacturer-marketer-issued food, grocery and non-food item coupons were redeemed (meaning they passed through retail stores) in the U.S. in January of 2009 than were redeemed in January , 2008.

"While we can't predict the future, it is safe to say that the traditional coupon is back in vogue for consumers, says Inmar's Jennifer Mauldin. "Even if the economy turns a corner sooner than later, a combination of factors have put coupons back on the radar of many consumers and introduced some to them for the first time."

Inmar is a logistics company that specializes in providing services and solutions between trading partners for the physical, financial and information flows within the supply chain. It's the nation's largest provider of promotions logistics and settlement services, serving over 1,700 business clients, including manufacturers, wholesalers and retailers. The company says it processes more than 3.5 billion transactions annually.

The Inmar data matches that from supermarket and other format retailers, which we've reported on and written about previously in Fresh & Easy Buzz . The retailers report that food and grocery coupon volume (use by shoppers) in their stores is at what some say is at an all time high, and what others say is significantly higher volume than they've seen in many years.

But since Tesco's Fresh & Easy has a policy of not accepting the manufacturer-issued coupons in its stores, the many shoppers who use the coupons take them to stores operated by its competitors, where they spend their money because those grocers accept the coupons.

Google & Yahoo - The Tale of the Search Engines: An Analysis of How Tesco's Fresh & Easy is Losing Out By Not Accepting Manufacturers' Grocery Coupons

Earlier today we wrote and published this piece [Analysis & Commentary: The Seven Retail Operations Changes Tesco's Fresh & Easy Neighborhood Market Needs to Make to Help it Get On the Success Track]. One of the seven retail operations changes we suggest in the story, and have been suggesting for at least a year, is that Tesco's Fresh & Easy Neighborhood Market change its policy of not accepting manufacturers' grocery coupons in its stores.

In the analysis below, we take a look the fast-growing trend among U.S. consumers to use the Google and Yahoo search engines to find grocery coupons, so they choose specific item coupons, print the coupons out, and use them at the grocery store in order to save money on their food and grocery purchases.

Today, Saturday, generally is the top shopping day for consumers to do their food and grocery shopping. It's a day off work for most Americans, and in most households it's what can be called household chores and errand-running day.

Fresh & Easy Buzz has for many months been writing about and offering analysis on what we call the mega-increase by American consumers in the use of manufacturers' "cents off" grocery coupons, those little slips of paper that come in the mail, are inserted in Sunday newspapers, and increasingly are available on the Internet at a multitude of coupon Web sites.

To show you just how popular the use of manufacturers' grocery coupons are becoming in the current economic recession, the search term "grocery coupons" is today the fourth most-searched term on Yahoo Search, just ahead of the actor Vince Vaughn (number five) and right after the actress Leelee Sobieski (number three most-searched).

And, what's up with Actress Carla Gugino that makes her the most-searched on Yahoo Search? You'll have to click her linked name on the top-ten list below to find out what all the fuss about her is.

Today's Top Searches on Yahoo Search

1. Carla Gugino
2. Michelle Obama
3. Leelee Sobieski
4. Grocery Coupons
5. Vince Vaughn
6. UFC 96
7. Bernard Madoff
8. Drivers Ed
9. Bartending School
10.DNA Tests

Google Trends for 'grocery coupons'

One way to demonstrate the dramatic growth in consumer interest (and use) in grocery coupons is to take a look at the search volume (for the U.S.) for the search term "grocery coupons" using Google Trends' "Search Volume Index," the analytical tool Google.com uses to rate and rank searches on its search engine.

The graph above (click here to view the graph) depicts the volume of Google searches for the search term "grocery coupons" from 2004-2008 in the entire U.S.

Notice the beginning of the spike in the number of searches starting in late 2007. The current recession officially began in December, 2007, according to the economic group charged with determining when recessions start.

Additionally, note the almost continual increase in searches throughout 2008, particularly the huge spikes in mid and late 2008. The financial and credit crisis hit hard beginning in about September-October, 2008 -- and it has been downhill in terms of the deepening of the recession since then. (Note: read the top portion of the graph, where it says "Search Volume index." The bottom portion of the graph measures the volume of news media searches.)

The graph pictured above (click here to view) is for 2008 (total U.S.). It shows a dramatic spike in searches for "grocery coupons" in October, right about the time when the financial crisis hit, then a trending down, and then another spike at the end of the year, the holiday period.

In 2008, the top ten states in which consumers searched "grocery coupons" on Google were: (1) South Carolina, (2) Kentucky, (3) Mississippi, (4) North Carolina, (5) Tennessee, (6) Alabama, (7)Georgia, (8) New Hampshire, (9) Missouri, (10) Arizona.

Seven of the ten top Google-search states are in the southern U.S. One, New Hampshire, is in New England in the east. The other two, Missouri and Arizona, are in the Western U.S.

Tesco's Fresh & Easy Neighborhood Market has stores in one of the top ten states -- Arizona. The other two states where Tesco has Fresh & Easy stores are California and Arizona. After California, Arizona has the second-highest number of Fresh & Easy markets. There currently are 115 of the small-format, convenience-oriented, combination grocery and fresh foods stores in the three states.

The graph pictured above (click here to view) is for 2009 thus far (all U.S. states). Note the significant spike in the graph for February.

Thus far this year, the top eight states for consumer searches on Google for "grocery coupons" are (1) North Carolina, (2) Georgia, (3) Ohio, (4) Texas, (5) Florida, (6) New York, (7) California, (8) Pennsylvania.

Notice that California, where Tesco operates the majority of its 115 small-format Fresh & Easy Neighborhood Market grocery and fresh foods stores, thus far this year has the seventh-highest amount of Google searches for "grocery coupons." About half of the 115 Fresh & Easy markets are in California.

California

Let's take a specific look at California, the largest state in the U.S. and home to Tesco's Fresh & Easy, specifically in terms of the volume of searches on Google for "grocery coupons.

The graph pictured above (click here to view) is for all of 2008. Note the major upward spike in June, 2008, then a steady trend, then a huge drop, followed by a major upward spike in September-October, 2008, when the financial and credit crisis hit big.

The following California cities and metropolitan regions had the highest volume (listed in rank order from first -to- 10th) of Google searches for 2008: Riverside, Rancho Santa Margarita, Long Beach, Santa Barbara, Irvine, Los Angeles, Pasadena, Bakersfield, San Luis Obispo and Fresno.

Tesco's Fresh & Easy currently has stores in each of these metropolitan regions except for Santa Barbara, San Luis Obispo and Fresno. It has plans to open stores in the Santa Barbara and Fresno regions in the very near future, and longer range plans to open stores in the San Luis Obispo region.

Since the grocery chain has numerous stores in the metro regions listed above that have the highest volume of "grocery coupon" searches on Google, and since most of the searches are for manufacturer's "cents off" grocery coupons on the Internet, rather than store coupons like Fresh & Easy offers, it's our analysis that by not accepting the manufactuers' cooupons, the grocer is missing out on all these shoppers who are searching Google for "grocery coupons," which it's rather safe to assume they then download, print out and take with them to the grocery store.

Our safe assumption that consumers aren't just looking at the coupons online, but rather going online to find the coupons and print them out, is backed up by statistics that show coupon use at all time highs throughout the U.S., including in California, Nevada and Arizona, where the 115 Fresh & Easy stores are located.

Above is California thus far in 2009 (click here to view). It's safe to say consumer-Google-users in California are pretty grocery coupon-focused so far this year, based on the data.

It will be interesting to see where the trend line goes once March is over and Google is able to include the full month data. The graph only includes seven days in March thus far, obviously. We suspect the trend line will go up more than it drops, as grocery coupon use continues to increase, and manufacturers' continue to distribute more coupons as a way to keep and increase sales of their respective brands in the recession.

Arizona

Now we turn to Arizona. Above is a graph for 2004-2008 (click here to view), depicting the volume of searches on Google for "grocery coupons" from consumers-Google users in Arizona. Note the huge spike in search in late 2008.

Additionally, this graph for 2008 shows a steady upward trend for Arizona in the volume of Google searches for the coupons in 2008.

Lastly, this graph depicts searches thus far in 2009. There are some peaks and valleys, and currently the trend is headed very much upward in coupon search volume.

Thus far this year these are the top seven (in ranked order) Arizona cities in terms of having the highest volume of coupon searches on Google: Pima, Tempe, Chandler, Phoenix, Mesa, Tucson and Scottsdale.

Tesco has Fresh & Easy stores, or will soon have stores, in all of these cities except for Pima (at least that we are currently aware of in the case of Pima.)

Nevada

The graph pictured above (click here to view) shows Google coupon search volume for 2004-2008 for the state of Nevada. Note the major growth trend beginning in late, 2008.

You can view all of 2008 by itself in this graph. Coupon search shot up considerably beginning in about October, 2008.

The top three Google-search cities for 2008 were (in rank order): Carson City, Las Vegas and Reno.

Carson City and Reno are in northern Nevada. Las Vegas is in southern Nevada. All of the Fresh & Easy stores are in the Las Vegas region in southern Nevada, where the vast majority of the state's residents live.

The fact that so many consumers in the Las Vegas Metro region were searching for coupons on Google in 2008 demonstrates how Tesco's Fresh & Easy is missing the boat by not accepting the manufacturer's "cents off" grocery coupons in its stores in Nevada (as well as in Arizona and California.) Those consumers that printed out the coupons took them to one of the grocery chain's competitors in the Las Vegas market region, where they used them to shop.

Lastly, this graph depicts the Google search volume thus far for 2009 for coupons. There was a huge spike in late February with the line now trending down. However, that's largely due to the fact we are only seven days into March.

Conclusion

It's increasingly said that as Google goes (and to a lesser but significant degree Yahoo Search and search in general), so goes the country -- and the world. Online search has revolutionized the way consumers live their lives and shop.

And as our analysis demonstrates, consumers are increasingly using manufacturers' grocery coupons and turning to search engines like Google and Yahoo Search to find the coupons online, download and print them out, and take them to the grocery store to use when they do their shopping.

It's all about pinching pennies and trying to save a buck in this severe recession. But it was a very popular consumer practice pre-recession as well.

Therefore, those grocers that accept the coupons, which amount to nearly 100% of all major food retailers in the U.S., are the ones who are benefiting, and will continue to benefit, from this fast-growing trend.

Meanwhile, Tesco's Fresh & Easy, which by company policy does not accept manufacturers' coupons from shoppers in its stores, will continue to lose out on the growing sales volume that comes from shoppers who choose where they shop to a significant degree (and since nearly 100% of all grocers take coupons it's not an issue for the majority of retailers) based on the fact they will be using the coupons as one of the ways of saving money on their food and grocery purchases in these trying economic times.

The trend is great for Fresh & Easy's competitors, since all of them accept the coupons. It's not so great for Fresh & Easy, since as a matter of policy and strategy it believes achieving the minimal savings in store labor required to handle the manufacturers' coupons from shoppers trumps the benefits of accepting them, and the added sales and customer loyalty doing so brings a food and grocery retailer.

Since about 100% of the grocery chains and independents (including Wal-Mart) in California, Nevada and Arizona take the manufacturers' "cents off" coupons -- and even encourage the use for promotional purposes -- these being Tesco Fresh & Easy's competitors -- might they collectively all not be on to something? Might the rule therefore be good retail operations strategy and the acception -- Tesco Fresh & Easy's no manufacturers' coupon policy -- be a bad one? We think so, as does the marketplace.

[Editor's Note: We've included links to the original Google Trends graphs for each of the graphs pictured in this post. Since the search data is dynamic, there will be changes in the original 2009 linked graphs over time compared to the 2009 graphs pictured in this piece. That's because as new search data is incorporated by Google into its search trends data base, the graph trend lines change. The 2009 graphs pictured in this post therefore are a snapshot in time, that time being when this piece was published this afternoon.]

[You can follow Fresh & Easy Buzz on Twitter at www.twitter.com/freshneasybuzz.]