Major Changes Coming to Tesco's Fresh & Easy Neighborhood Market Stores

Breaking Buzz - News/Analysis

Tesco's Fresh & Easy Neighborhood Market is preparing to make some major and significant changes inside it small-format fresh food and grocery markets, including adding bakery ovens it will use to bake its artisan breads in-store throughout the day, Fresh & Easy Buzz has learned.

Current plans at United Kingdom-based Tesco and its El Segundo, California-based Fresh & Easy Neighborhood Market chain call for rolling out the changes to as many as 100 stores by the end of this year.

Below are the key changes Tesco will soon start making to some of its 175 Fresh & Easy stores in California, Nevada and Arizona.

Fresh baked bread and bread-bakery front and center

The first and most significant change Tesco's Fresh & Easy plans to make is to install bread-baking ovens in the stores. The ovens will be used to bake Fresh & Easy's artisan breads in-store throughout the day. The grocer is also considering using the ovens to bake other selected items.

As part of its plans to install the bakery ovens and bake the artisan breads in-store, Fresh & Easy Neighborhood Market plans to relocate the bread and bakery sections and shelves from their current locations in the rear of the stores to the front of the store, as a way to showcase what it hopes will become a key offering, led by the fresh-baked breads and related merchandising, in the small-format fresh food and grocery markets

The addition of the ovens and the relocation of bakery to a more prominent, up-front location in the stores is part of an overall plan to attempt to create a warmer feeling and improved "sense of place" in the small-format (10,000-12,000 square-foot) Fresh & Easy stores, which feature a spartan "small box" design including cement floors, warehouse-style grocery shelving and utilitarian fresh and frozen food product display fixtures.

In April Tesco's CEO, Philip Clarke, said during his presentation of the UK-based global retailer's fiscal year 2010/11 financial results that later this year the Fresh & Easy stores would begin opening an hour earlier - at 7 a.m. - than their current 8 a.m opening time and concurrent with that change the stores will start offering fresh-brewed coffee and pastries in-store, hoping to become a morning destination stop for commuters and others.

Around five of the 175 Fresh & Easy stores currently open later than 8 a.m. - at 10 a.m. A couple of those same stores also close earlier than the regular 8 p.m. closing time. Fresh & Easy made the changes last year.

The planned addition of the in-store bread-baking ovens and relocation of the bread and bakery section to the front of the Fresh & Easy grocery markets is related in part to the earlier store opening time and new coffee and pastry offering Clarke mentioned last month, although it was in the works before then.

As part of the relocation of the bakery section, the installation of the in-store bread-baking ovens and the upcoming offering of fresh coffee and pastries, some of the Fresh & Easy stores will also get "mini-cafe" areas featuring seating of some type and/or a coffee bar where customers can drink their coffee and eat pastry, muffins, fresh-baked bread and other items in the store, according to our sources.

[You might find this February 21, 2008 story from Fresh & Easy Buzz - A Look at Fresh & Easy at @ 50 (Stores): An Analysis and Some Suggestions for Going Forward - this piece from March 24, 2008 - The Analysis of Tesco's Fresh & Easy From Piper-Jaffray's Mike Dennis in This Interview Published Today Sounds A Lot Like Ours For the Last Few Months - and these stories interesting and informative.

Yes. We first suggested serving coffee, offering "mini cafes" and much more in the Fresh & Easy stores in February and March 2008 (see the linked stories above) and have written about it and other changes designed to create an improved "sense of place" (and for other top and bottom line reasons) in the stores since then. For example, here's a story from September 2010 we suggest you take a look at: September 14, 2010: Eight Plus One: Napa Unit Added to Eight Fresh & Easy Neighborhood Market Stores Opening in Northern CA in Early 2011.]

According to our sources, how many of the stores will get such sit-down options hasn't been determined yet by Tesco and Fresh & Easy Neighborhood Market.

Essentially, the overall plan is to make the front-of-store bread and bakery section and the coffee and pastry offering the first thing customers see - and in the case of the fresh bread baking and coffee brewing, the first thing shoppers smell - when they enter the stores, something Clarke and Mason hope will help create a warmer feeling, more inviting in-store experience and better first impression from shoppers - along with selling some coffee, pastries and fresh-baked artisan bread - according to our sources.

The multiple top and bottom-line goals of the change and new additions are to help increase customer counts, gain more repeat shoppers, increase sales, and ultimately improve Fresh & Easy's margin, which is currently a rock-bottom negative-38%.

Going mobile with the 'Kitchen Table'

A second major change planned for the Fresh & Easy stores is to eliminate the in-store area called the "Kitchen Table," which is used primarily and regularly for product sampling, and replace it with a mobile unit that can be wheeled throughout the store so food products can be sampled next to where they're located in the stores -  in the condiment aisle, produce or meat department and the like - rather than being done at a fixed location, which is what the "Kitchen Table" currently is in the stores.

We've pointed out more than once in Fresh & Easy Buzz just this limitation with the fixed location "The Kitchen Table" food sampling station.

It's going away, to be replaced by a mobile version that can be used anywhere in the store, allowing food demos to be done right where the product being sampled is shelved or displayed.

The Fresh & Easy stores will also gain valuable product display space by removing "The Kitchen Table" and taking it mobile.

The square-footage currently taken up by the food sampling kiosk is "dead space" from a sales-per-square-foot perspective.

An example: If "The Kitchen Table" currently takes up 100 square-feet, that's 100 square-feet in the 10,000-12,000 square-foot Fresh & Easy stores that's not producing sales. Conversely, if product was displayed in the 100 square-feet space, which will soon be the case, whatever dollar amount of sales that space generates contributes to the total average sales per-square-foot of the store, resulting in a net-plus for the grocery chain.

Small-format stores like those operated by Tesco's Fresh & Easy can't afford to waste precious and valuable sales square-footage with permanent installations like the soon to be mobile "Kitchen Table," as we've pointed out previously in the blog.

Current plans call for turning the space where the "Kitchen Table" is now located in the stores into an end-cap to be used for product display purposes, our sources tell us.

Fresh flowers front and center

Another significant planned change for the Fresh & Easy markets is the moving of the fresh flower displays from the current location in the stores to a front-of-store lobby location.

Similar to the strategy behind moving the bread and bakery items up-front, this change will put the fresh flowers in a more prominent location in the stores, perhaps providing some of that warmth and better "sense of place" (our phrase and useage and not his) Tesco CEO Clarke, who just took over in March, would like to see in the Fresh & Easy stores.

Visualize it this way: Fresh flowers (which tend to evoke warm and fuzzy feelings in people), bread and baked goods (a warm and wholesome fresh food offering) will be among the first things customers will see (visual) as they enter the store. Along with that visual, those with decent-to-good olfactory senses will smell the scent of fresh coffee being brewed and artisan bread being baked, something that shouldn't be too difficult to do because the Fresh & Easy stores are small.

Many of the Fresh & Easy stores already merchandise a selection of fresh flowers and plants at the front-end of the stores and even outside, particularly those units that have outdoor patio areas.

For example, a Fresh & Easy Buzz senior correspondent visited the store in Pacifica, California, which was opened March 9 of this year, today and saw an assortment of potted plants merchandised on the outside patio area by the left-front entrance of the store, a display of fresh cut flowers located up-front near the front doors, and a selection of orchids displayed at the front-end checkout stands.

New meat, deli-prepared foods refrigerated cases

Tesco is also planning to replace the utilitarian open shelf-style refrigeration display cases it currently uses in the Fresh & Easy stores to display fresh meats and deli-prepared foods products with new, closed-in style fixtures that not only are much more attractive than what's currently in the stores but also have much higher energy efficiency than the existing open-style cases do.

The new refrigerated display cases fit into Tesco's overall desire to create a warmer and more inviting look and feel in the Fresh & Easy stores - that needed improved "sense of place" we've been writing about in the blog regularly since February 2008 - along with offering the energy-saving benefits.

A season of change

Tesco is planning a few other changes as part of the overall makeover we're reporting on in our story today.

However, those we've detailed above are the major and most significant changes Tesco is planning to soon start implementing in some of its Fresh & Easy stores.

Neither Tesco or its Fresh & Easy Neighborhood Market chain have publicly announced the plans or any of the changes we're reporting on today. The only mention has been of the planned 7 a.m opening time and the serving of coffee and pastries in the stores, which CEO Clarke noted in April.

Additionally, based on a comprehensive search of the three major search engines - Google, Yahoo and Bing - prior to publishing this story, no other publication has to date reported on any of the plans we're reporting on exclusively today.

We also know this to be true because of how closely and comprehensively we cover Tesco and Fresh & Easy Neighborhood Market.

Therefore, if you see stories on the changes we're reporting on today published in other publications in the following days and weeks, as Fresh & Easy Buzz readers you'll know it was reported here first, and will be able to say you first read the news here.

Current plans at UK-headquartered Tesco and and at Fresh & Easy Neighborhood Market, which is based in El-Segundo, California, call for the grocery chain to start rolling out the changes we're reporting on today to selected stores soon.

Tesco and its Fresh & Easy chain hope to have the changes detailed in this story, along with a few others, implemented in up to 100 of the 175 Fresh & Easy grocery markets by the end of this year, our sources tell us.

Fresh & Easy Neighborhood Market is currently testing the various new features we're reporting on today in one of its stores.

We're very familiar with the store where the test has been and is going on. However, we've decided not to disclose the location at this time.

The test, along with a couple other variables, has led Tesco CEO Philip Clarke, to "green light" the changes to what could be up to 100 stores by the end of 2011.

Behind the major changes

As we've previously reported in Fresh & Easy Buzz, although he's only been CEO since March 2011, having officially taken over March 3 from Terry Leahy who retired, Clarke, who was formerly head of Tesco's European retail operations and corporate information technology and who's been with the company for over three decades, has already made at least two trips to the U.S. to Fresh & Easy's corporate offices in El Segundo, its distribution center facility in Riverside County and to visit selected stores in California, Nevada and Arizona.

Clarke's first visit was in February of this year, before he officially assumed the CEO position. (See the story linked at the end of this piece.)

Tesco announced Leahy's retirement and Clarke's appointment as CEO in June 2010, and Clarke worked closely with Leahy from that time until taking over in March as part of the global retailer's succession plan strategy.

His second and most recent U.S. Fresh & Easy-related visit was in early April, when, according to our sources, Clarke made the final decision

The new CEO is under significant pressure from major institutional investors to right the Fresh & Easy Neighborhood Market ship.

For example, Warren Buffet and partner Charlie Munger, who through their Berkshire-Hathaway holding company and investment arm own about 3% of Tesco plc stock, spoke out publicly about Fresh & Easy for the first time at the recent Berkshire annual meeting in Omaha, Nebraska, which was attended by our 'The Insider' columnist, suggesting to Tesco - and CEO Clarke - that the UK-based retailer should take a very close look at its U.S. operation and seriously consider if it might not be time to pull the plug on Fresh & Easy, which has racked up losses of nearly $1 billion since the first stores opened in November 2007.

Last month Tesco reported a loss of $300 million for Fresh & Easy in its 2010/11 fiscal year which ended February 26, 2011.

We've been covering and writing about Warren Buffet and Berkshire-Hathaway since 2008, as it relates to the 'Oracle of Omaha' and partner Munger being one of Tesco's major institutional investors.

Based on our extensive coverage, we can report with a fairly high degree of confidence the recent comments by Buffett and Munger are the first time either has spoken out publicly in any way that casts doubt on Tesco's decision to continue forward with Fresh & Easy or its ability to succeed with the U.S. chain.

In fact, less than a year ago Buffett bought additional Tesco plc stock, and at the time wasn't concerned about Fresh & Easy Neighborhood Market being a drag on Tesco's value. He's concerned it is now, which is the primary motivation behind the statements he and Munger recently made.

Clarke said shortly after taking over as CEO and again in April he has faith in Fresh & Easy Neighborhood Market succeeding going forward.

The current strategy signed off on by Clarke is to have 300 Fresh & Easy stores, all being distributed to out of the Riverside County facility in Southern California, open and operating by the end of Tesco's 2012/13 fiscal year, which ends in February 2013.

Philip Clarke, is on the record as saying with the 300 stores open by then, Tesco will break-even with Fresh & Easy when it reports its 2012/13 financial results in April 2013.

There are currently 175 Fresh & Easy stores open and operating in California, Nevada and Arizona.

Tesco said in April it plans to open 50 new Fresh & Easy stores this year, all in the existing three states.

So far this year the retailer has opened 21 Fresh & Easy grocery markets - 11 in Northern California and 10 in Southern California.

No new Fresh & Easy stores are set to open in May. That means from June-to-December of this year Tesco needs to open 29 Fresh & Easy stores to hit its 50 store target.

The 21 new units were opened from January -to- April of this year, so opening 29 Fresh & Easy stores over the next seven months is achievable for the retailer, based on what's its done to date so far in 2011 and its past new store opening track record.

But it's going to be more difficult for Tesco to get to the 300 store number by the end of its 2012/13 fiscal year.

For example, if it opens the 50 new Fresh & Easy units this year, it will have 225 stores open and operating as it goes into 2012, leaving the retailer with 75 new stores to open from December 2012 -to- mid-February 2013.

The goal is achievable but not easy - particularly making sure the 75 stores are in prime locations, which is something Tesco has not done with Fresh & Easy in the three and a half years its been opening stores.

The reality is, far too many of the current Fresh & Easy stores are in poor or mediocre locations, which is something Tesco began to remedy when it closed 13 poor-performing stores - six units each in Nevada and Arizona and one grocery market in Southern California - on November 2010. There are stores currently doing as poorly from a sales perspective as those 13 were when the decision was made to close them last year.

But for the analyst at the London, UK investment firm and any others who are currently suggesting to the media and others they have the inside track on knowing Philip Clarke plans to pull the plug soon on Fresh & Easy, the major changes we're reporting on today serve as a counterfactual, not to mention empirical, refutation of those assertions, which in at least the one case are being made as part of a publicity campaign.

They're statements and not arguments because the assertions are backed by very little knowledge (and the hard work required to obtain that knowledge) about what's actually going on at Tesco's Fresh & Easy, accept for what they read in Fresh & Easy Buzz and perhaps elsewhere.

The informaton and work product from an objective publication like Fresh & Easy Buzz is then appropriated wthout permission and intentionally used to support an a priori determined conclusion - and also because it's easier than doing the hard work themselves - without informing their primary audience and the writers and editors of the publications they're seeking publicity from where they obtained the information. [See May 4, 2011 here and May 6, 2011 here, for an example.]

[Also read this story we wrote and published over three years ago in Fresh & Easy Buzz - March 24, 2008: The Analysis of Tesco's Fresh & Easy From Piper-Jaffray's Mike Dennis in This Interview Published Today Sounds A Lot Like Ours For the Last Few Months.]

After all, would Tesco be making what will be a considerable financial investment in implementing the changes we're reporting on if

The answers are - no. No yet. And not in 2011, according to our research and reporting. That doesn't mean Clarke and Tesco's board won't pull the plug on Fresh & Easy before the end of Tesco's 2012/13 fiscal year however. Doing so remains a distinct possibility.

The major changes reported in our story, along with a few more to come, are, as noted earlier, set to start being rolled out to selected stores, beyond the current single test unit, soon.

Are the changes the right ones?

Will the major changes be enough to help Tesco right the Fresh & Easy Neighborhood Market ship?

We plan to address those propositions and a couple others in an upcoming piece.

Stay tuned.

[Editor's Note: The changes detailed aren't the only major and significant ones coming to Tesco's Fresh & Easy. Read our exclusive report from April 12, 2011 here: Fresh & Easy Neighborhood Market to Shrink Health & Body Care Sections in Stores; Add Candy and Snack Items.]

[Readers: Click on the following links - sense of place, store design, local retailing, neighborhood retailing, sense of place theory, localism, localization, localizing Fresh and Easy to neighborhoods, Fresh and Easy sales performance, store average weekly sales, store sales analysis,Warren Buffet, Philip Clarke,Sir Terry Leahy, Tim Mason - to see some related stories.]

Additonal Suggested Related Reading

May 11, 2011: CEO Philip Clarke Launches A New 'Vision and Strategy' For Tesco

April 19, 2011: Tesco's Fresh & Easy Neighborhood Market Posts Biggest One-Year Loss Yet - $307 Million Loss on Sales of $818 Million

February 23, 2011: Incoming Tesco CEO Philip Clarke Visits America - And Fresh & Easy Neighborhood Market

October 8, 2010: Incoming Tesco CEO Philip Clarke Needs to 'Imagine' When it Comes to Fresh & Easy Neighborhood Market USA

September 13, 2010: Reading Philip Clarke's Tea Leaves: Might A Mixed Corporate/Franchise Model Be in Fresh & Easy Neighborhood Market's Future?

June 12, 2010: Will Phil Clarke Shake Things up at Fresh & Easy Neighborhood Market USA When He Becomes Tesco CEO in 2011?

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

The Fresno, California City Council last night approved plans for an approximately 15,000 square foot Tesco Fresh & Easy Neighborhood Market at 2820 Tulare Street in the Central Valley city in California.

The 2820 Tulare Street location is the site of Fresno's historic old Hofbrau restaurant, pictured at top, which once was a city landmark famous for its generous portions of roasted beef, turkey, ham, pastrami and other meats and side dishes, along with its numerous varieties of cold draft beers, before it was closed down.

Fresh & Easy Buzz has learned the Tesco Fresh & Easy Neighborhood Market at the old Hofbrau location in Fresno will be the first store in which the grocery chain plans to incorporate local, community and neighborhood elements into the design theme of, which is something we've been suggesting since January Tesco do with its Fresh & Easy stores.

Plans for the Fresh & Easy grocery market going into the old Hafbrau include the store having a clock tower as part of the design, a masonary facade and murals which reflect the historic and cultural nature of Fresno and the 2820 Tulare Street neighborhood.

Including local (community and neighborhood) design features, including using murals with a local flair, is something Fresh & Easy Buzz has suggested in numerous blog pieces Tesco do with its Fresh & Easy stores in order to localize them, better fit into the communities and neighborhoods where it has its stores, and create a better "sense of place" to enhance the shopping experience in the stores for customers.

A member of the Fresno planning department told Fresh & Easy Buzz Tesco wants the store to fit into the historic elements of the neighborhood, as well as play up on the old Hafbrau's historic home there.

We've argued for a number of months that it's important--and will lead to greater success for the grocery chain--for Tesco to localize some of the design elements of its stores so as to respect and reflect the history and culture of the communities and neighborhoods it locates its small-format, combination grocery and fresh foods markets in because doing so will make the retailer not only a more accepted member of the neighborhood, but will pay dividends in the form of increased sales and customer loyalty in return.

As we were the first publication to report on March 17 (with a detailed follow up piece in May), Tesco plans to open at least an initial five Fresh & Easy grocery stores in the Fresno Metropolitan region, and likely will open additional stores in the region down the road. The first Fresbo market region stores should start opening in early 2009.

We haven't heard anything from our Fresno sources, both within the city government and in the commercial real estate and business community in the city, about any of the other four planned Fresno region Fresh & Easy stores having localized design enhancements like plans call for the 2820 Tulare Street store going into the old Hofbrau to have. We are continuing to investigate that aspect however.

Meanwhile, based on the overview we received from a source who was at last night's Fresno City Council meeting, it appears the plans for the old Hofbrau building Fresh & Easy grocery store are singularly unique compared to the 63 small-format grocery stores the grocery chain has opened thus far in that the retailer is taking some local community and neighborhood elements and aspects into consideration in the design of the store, rather than it being a cookie cutter-designed grocery market like the current stores, the majority of which have gone into remodeled existing buildings, are.

Like we've been suggesting since December, 2007--localization of some elements of a grocery store's design, along with some aspects of its product mix, is key in today's food retailing and local consumer-conscious society. Or, as the late, longtime former Speaker of the U.S. House of Representatives Thomas "Tip" O'Neill used to say when asked to explain his fabulous success in politics..."Everything is local."

A Selection of Past Fresh & Easy Buzz Posts about Fresh & Easy Neighborhood Market and the localization of store design:

February 21, 2008: A Look at Fresh & Easy at @ 50 (Stores): An Analysis and Some Suggestions for Going Forward

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

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

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

April 5, 2008: F&E Buzz Reader and Food and Beverage Industry Entrepreneur Offers Her Suggestions to Tesco's Fresh & Easy About 'Sense of Place' and 'Localism'

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

April 9, 2008: Arizona's Shopper and Employee-Beloved Bashas' Named One of 'The Best' Places to Work in the State For Second Year in a Row

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

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

May 13, 2008: Deja Vu All Over Again: Perishable Pundit Writes About 'Duality' Fresh & Easy Buzz Recently Observed At SoCal and Las Vegas Fresh & Easy Store Visits

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

Tesco is Incorporating New Interior Design Elements and Enhancements Inside its 61 Fresh & Easy Neighborhood Market Grocery Stores

The Fresh & Easy store pictured above in Laguna Hills, California is one of the first of the 61 stores currently open to receive the retailer's new interior design enhancements. For example, The mural-graphic above the front doors in the photograph is brand new. (Photo: Courtesy Fast Food Maven Blog, Orange County Register.)

Tesco has started making some interior design additions and upgrades to its Fresh & Easy small-format, convenience-oriented grocery stores.

The retailer currently operates 61 of the combination basic grocery and fresh foods markets in Southern California, the Phoenix Metropolitan-East Valley region in Arizona, and in the Las Vegas Metropolitan area in Nevada.

The interior design enhancements and upgrades include adding brighter colors inside the grocery markets, more directional, informational and product signage, some new graphics, and creating a brighter, warmer and less sterile in-store experience overall for shoppers.

Fresh & Easy Buzz welcomes these in-store design changes, additions and enhancements, since we've been one of the first and most-regularly vocal constructive critics of what we've called a lack of a "sense of place" inside the Fresh & Easy grocery stores.

[This pertains to the majority of the stores which are located in former retail buildings Tesco has remodeled into its Fresh & Easy format and stores. We've visited two stores, one in Las Vegas the other in Indio, California, which are brand new, built from the ground up Fresh & Easy markets, and have a generally favorable opinion of the interior design and look of those stores, which are built to the Fresh & Easy new store prototype.)

Many other analysts have joined Fresh & Easy Buzz's "lack of a sense of place" position over the last few months regarding the look and feel of the Fresh & Easy stores. We based our assessment of the store interiors not only on our own experience and analysis, but on conversations we've had with about 250 Fresh & Easy customers over the last five months or so, as well as on reading hundreds of online comments from consumers about the stores, lots of emails and comments on the blog.

In addition to our own analysis that the stores are too cold and sterile and lack a "sense of place," this opinion has been predominant in our conversations with customers, as well as from the other information sources mentioned above.

It appears Tesco's Fresh & Easy Neighborhood Market also agrees with our and others (especially customers) assessment, as the retailer sent a memo to all its store-level employees in Southern California, Arizona and Nevada, informing them of the new store interior design additions and enhancements, saying in the memo the retailer was responding to customer feedback that the stores are cold and sterile, and therefore is introducing the interior design enhancements.

Thus far, Tesco has introduced the interior design enhancements at two Fresh & Easy stores in Southern California: the Laguna Hills store in Orange County and the Eagle Rock store in Los Angeles; along with making the additions in a couple stores in Arizona.

Fresh & Easy Neighborhood Market says all of its stores will have the interior design enhancements by July 2. July 2 also is the date the next new Fresh & Easy grocery store opens, in Manhattan Beach, California.

Tesco is taking a new store opening pause from April until July 2, as we've written about several times.

One Wednesday, we talked to an employee of the Laguna Hills store, who told us customers have been responding rather positively to the interior design enhancements. In particular the employee said numerous customers have mentioned the store feels much less sterile and is far brighter than it was before the new brighter color and other design additions were made.

Additionally, Mike Ragone, a Fresh & Easy Buzz reader who lives not far form the Laguna Hills store and has been in it before the design enhancements were made, told us he visited the Laguna Hills store this week, and noticed the changes.

Ragone says the improvement is considerable in terms of brightening the store up, but added he thinks other interior changes should be made in order to give the store (and all the Fresh & Easy stores in the converted buildings) a warmer, more appealing look and feel.

A consumer, Troy, commented in the Fast Food Maven Blog written by Orange County Register business reporter Nancy Luna, he particularly likes the "Thank You For Shopping With Us" mural in the picture at the top of this piece that's been added on the wall above the entrance doors in the Laguna Hills store. Troy's comment:

Troy Says: May 12th, 2008 at 1:14 pm
I like the new “thank you for shopping with us” mural they just added to the Laguna store, pictured above. That’s exactly the type of decor and personality infusion these sterile stores need. See Tesco, it’s not that hard to have a personality! Keep it up and I may give the Orange store another try after you fix it.

Fresh & Easy Buzz is looking forward to seeing the new interior design enhancements in the stores in the coming week or so.

Since we've been one of the major proponents suggesting Tesco needs to make the stores warmer and brighter in a quest to create a "sense of place" in them, we think the changes--whether they are enough or not at this point in time--are a good, positive and welcome move by Tesco's Fresh & Easy Neighborhood Market.

As our regular readers know,--and non-regular readers will learn by reading further--Fresh & Easy Buzz also suggests Tesco needs to customize and localize the store interiors a bit on top of its basic Fresh & Easy blueprint and footprint.

For example, we suggest adding Southwestern or similar flairs in the Arizona stores, along with minor things unique to particular neighborhoods in the region, as well as doing the same with the Southern California and Las Vegas Metropolitan area stores, regarding local attributes in those store's areas.

In many cases, this can be as simple as using signage, artwork and murals reflecting local history, culture and demographics.

The customization and localization process also can be tied-in to bringing in locally-produced foods, and then using in-store graphics and signage to play up the local products. This serves two purposes: it promotes local foods, and it better localizes the stores to their respective neighborhoods. In other words, it helps to put the "Neighborhood" in Fresh & Easy Neighborhood Market.

Fresh & Easy Buzz recently talked with a source who was present when Tesco's Fresh & Easy was interviewing potential new public relations firms a couple months ago. As we reported here, the retailer has chosen a new PR firm. The source told us during the "pitch meeting" Fresh & Easy executives mentioned recognizing a need to better customize and localize the stores, including using the phrase "to better reflect the history and culture of the neighborhoods."

The Fresh & Easy Neighborhood Market executives said in the meeting however, that it wasn't something they were going to be able to do anytime soon, because of the rapid new store opening pace on the agenda, along with some other "more pressing" things.

Based on this information, it does appear a couple key Tesco Fresh & Easy Neighborhood Market execs clearly get the need to and the importance of customizing and localizing the store's interior design elements as a way to create a better "sense of the place" in the stores, which most likely will result in our analysis in creating more repeat and primary customers, bigger store average ring or market basic averages, and generating lots of new customer trail for the stores. Of course, often timing is everything in food retailing.

Perhaps they current decision to add the interior enhancement package is in part a stop gap to eventually being able to also add regional and local customized design elements to the stores on top of the basic Fresh & Easy store format blueprint?

As we've often written here on Fresh & Easy Buzz, one of Tesco's key strengths as a retailer is its proven ability to course-correct. We give Fresh & Easy credit for doing so in the current design enhancement package the retailer is adding to the stores--even if when we see the enhancements we personally don't like them--which would not in any way detract from our giving the retailer credit for making them, and making the course correction.

We don't shy away from our analysis that Fresh & Easy has numerous problems. But like we always caution, those who've already ruled Tesco out of the success equation with its small-format, convenience-oriented Fresh & Easy grocery stores do so at their own peril.

After all, most of the 61 stores haven't even been open for more than four months, and Tesco is course-correcting by making the interior design package enhancements to the stores. Perhaps they should have done it sooner, and perhaps it won't make a difference--but then again perhaps it will. A bit of time is needed to make a proper assessment either way.

But, what's important is the retailer listened to those (especially customers who are the most important) and made a course-correction in terms of realizing the stores were too sterile and cold, and is attempting to do something to improve that fact by adding the interior design enhancements.

That's what good, world-class retailers do. [By the way, we also like the mural/graphic depicted in the photograph at the top of this piece, which is above the front doors in the Laguna Hills' Fresh & Easy store.]

Vox Populi: Let The People Speak

Feel free to use the "comments" link below to offer your analysis and opinions on the design of the Fresh & Easy grocery stores, along with offering any ideas and suggestions about interior design enhancements Tesco could or should make to the stores in order to improve them. If you like the stores just as they are, feel free to express that opinion as well, and to elaborate as much as you like.

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

USA Today business writer Bruce Horovitz--who rumor has it reads Fresh & Easy Buzz on occasion--has a brief piece in the just hot off the press (well, cyberpress) edition of America's national newspaper, which talks about three of our favorite (and very often written about) retail themes in relation to retail grocery stores: neighborhood, community, "localism" and sense of place.

As F&E Buzz readers know, we discuss all these related concepts often in terms of what our analysis tells us Tesco's Fresh & Easy small-format, convenience-oriented, combination basic grocery and fresh/specialty foods grocery markets lack. We also offer numerous suggestions on how Tesco can better create that sense of place, community and neighborhood in its Fresh & Easy stores.

In fact, one of our favorite (and yes, most used) sayings is that Tesco Fresh & Easy Neighborhood Market needs to put the "neighborhood" in its Neighborhood Markets by creating a better sense of place in its stores.

On of the key variables we argue the retailer needs to foucus on in order to achieve this needed result (more sense of place and "neighborhood" in the grocery stores) is "localism," which we define as the need for Tesco's Fresh & Easy to achieve a greater understanding of the history, culture, behavior (of residents) and demographics of the people who live in the neighborhoods where the stores are located--and then to customize certain design elements and features of the grocery markets to these respective neighborhoods--along with greatly increasing the "local" food and grocery product mix in the stores, as well as customizing (neighborhood merchandising) the product mix (on top of the stores basic mix) to each neighborhood.

What we suggest is far from a foreign concept or strategy in U.S. food and grocery retailing.

Give Mr. Horvitz's USA today piece--"It's A Beautiful (Shopping) Day in the Neighborhood," a read here.

By the way, We think Mr. Neighborhood himself, Fred Rogers, would agree with our arguments on "neighborhood," "community," "localism" and "sense of place" as they relate to grocery retailing. We think he also would like Mr. Horovitz's title, and "neighborhood-oriented" retailing piece.

F&E Buzz Reader and Food and Beverage Industry Entrepreneur Offers Her Suggestions to Tesco's Fresh & Easy About 'Sense of Place' and 'Localism'

Editor's Note: Beverage industry entrepreneur and former consumer packaged goods marketer Lucy Leahy has been reading Fresh & Easy Buzz and focusing particularly on our analysis and prescriptive suggestions that Tesco's Fresh & Easy grocery stores are lacking a "sense of place" and need to "localize" the store's themselves and their product mixes far more to the communities and neighborhoods the grocery markets are located in.

Armed with a Harvard MBA, a number of years' experience as a consumer packaged goods marketer and, perhaps most important of all being a new mother, Ms. Leahy in 2007 founded Glow Mama, a low-calorie, vitamin and nutrient-packed healthy beverage for pregnant woman, which is endorsed by the American Pregnancy Association.

Lucy Leahy grew up on a small Kiwi Fruit orchard in New Zealand and now lives in Oakland, California, where her beverage company is based. As such, her life seems to suggest she knows a little about importing concepts from home--the idea to use Kiwi's in the Glow Mama drinks for example--but keeping things local--which her marketing efforts for the beverages clearly are. (we aren't saying the Kiwi's come from New Zealand by the way, but rather the concept does.)

Read Fresh & Easy Buzz reader and food and beverage industry entrepreneur Lucy Leahy's suggestions to Tesco and its Fresh & Easy management group regarding what she thinks might make the stores more popular and thus more successful below:

Dear Fresh and Easy,
I can empathize with your startup struggles here with your new stores and wish you all the best success – sounds like you’re listening to lots of good business, PR and marketing advice on how to turn things around. One thing that would give your stores more of a “sense of place” would be supporting local small vendors more and linking your customers meals back to their neighboring farms, growers and business people. Take a lesson from Gordon Ramsey’s book and try and teach Americans to care where their food comes from and to take interest in the new blossoming categories of nutrition and wellness. If you make a point of supporting your local vendors (as opposed to being “arrogant” as reported recently), you’ll find the vendors much more proactive in helping you reach your communities and neighborhoods and your customers more willing to venture in and support your local green grocer format.

Thanks,
Yours sincerely,
Lucy Leahy – CEO and founder
Glow Beverages
The new startup lifestyle beverage company
http://www.drinktoglow.com/

Editor's Note II: As far as we know, Lucy Leahy isn't related to Tesco CEO Sir Terry Leahy. However, since U.S.Vice President Dick Cheney's wife Lynne recently announced she discovered (through a geneological search she had done) Democratic candidate for President Barack Obama and her husband the VP are distant cousins, (which has become part of Obama's stump speech humor) one never knows :)

Is Tesco's Fresh & Easy Playing the Fiddle While Palm Springs' 'Burns' for A Trader Joe's?

Today's addition of the Desert Sun, the daily newspaper for the Southern California desert city of Palm Springs, reports that a neighborhood coalition wants a Trader Joe's grocery store in its city so bad, it's launched a petition drive to convince the retailer to open a store in this residential and resort town of about 75,000 residents.

According to David Carden Jr., chairman of the Baristo Neighborhood Coaltion in Palm Springs, the group has thus far obtained 3,500 signatures towards its goal of 5,000 on a petition asking Trader Joe's to open one of its 10,000 square foot specialty grocery stores in the city. Carden told the Desert Sun the coalition hopes to reach its goal by April 11, 2008. (Read the full Desert Sun story here.)

Palm Springs, which is located in the Southern California desert region, is not only a fast-growing residential area and one of the top retirement communities in the U.S., it also has a thriving tourism and convention industry--one of the biggest in the country in fact. The city is especially packed with tourists in the winter months (January through March) when the temperatures in the city and surrounding region are in the 90's, and often hit over 100 degrees. The city's demographics and overall income level fits very well with the types of locations Trader Joe's seeks out for its grocery stores.

Community groups petitioning Trader Joe's in this manner isn't that unusual. For example, a group in Albany, New York is currently conducting a similar petition drive--along with an agressive and professional lobbying and PR campaign--aimed at convincing Trader Joe's their city is worthy (and the demand is there) of a TJ's grocery store. A group in Nashville, Tenessee is doing the same.

Numerous other cities in the U.S. have launched similar petition drives designed to hopefully bring one of the popular Trader Joe's stores to their respective towns. In 2000, citizens in the Southern California city of Long Beach were successful in getting TJ's attention with such a petition drive and PR program--and as a result Trader Joe's built and opened a grocery store in that city.

This is the type of consumer demand most food retailers would trade a lifetime's worth of free groceries for. Fresh & Easy Neighborhood Market would love this level of demand in Palm Springs (and elsewhere), for example. However, despite the fact the retailer will soon open a Fresh & Easy store in Palm Springs, the neighborhood coaltion still wants a Trader Joe's. That isn't a critique of Fresh & Easy so much as its testimate to the brand strength of TJ's. However, it is something Tesco's Fresh & Easy Neighborhood Market senior management should study and learn from we believe.

Perhaps the Palm Springs' group doesn't even know Tesco's Fresh & Easy Neighborhood Market will soon open one of it's 10,000 -to- 13,000 square foot grocery markets--which have many similarities to TJ's, but also a number of differences--in the desert city soon. Of course, we think they should know, since Fresh & Easy has a number of its grocery stores located right around Palm Springs, and just opened a new store two days ago in the neighboring city of Palm Desert. Plus, it's not like their hasn't been any publicity regarding the British grocer's petite grocery stores in Southern California.

With these facts and realities in mind regarding Treader Joe's, here are a few things we would do immediatly upon reading this news if we were part of Tesco's Fresh & Easy Neighborhood Market senior management team:

>Call Mr. David Cardon Jr., head of the Palm Springs' neighborhood coalition, and invite him to a "coffee date" in downtown Palm Springs. At coffee, give him a brief overview of Fresh & Easy, including an overview about the new store that's set to open soon in Palm Springs. (Note: pay for his coffee and a pastry for him.)

Also during coffee, ask him if you and another of your Fresh & Easy collegues can meet with the Baristo Neighborhood Coalation, give them a brief presentation, and most importantly, ask them for their input in what they want in their Fresh & Easy that the stores' don't currently have. (We suspect they will tell you they want a numer of things TJ's stores have.) Bring them some Fresh & Easy fresh brewed coffee and a variety of treats on meeting night, by the way.

>Once you have informed the group about the coming Palm Springs Fresh & Easy grocery store, and listened to and written down all of their comments about why they want a Trader Joe's in Palm Springs so much, the hard work begins. You, Fresh & Easy executives, will need to decide what new elements, from the input from the group, you will implement in the Palm Springs Fresh & Easy store that just might be in your format. In other words, localization within the basic Fresh & Easy format blueprint.

We suggest you incorporate most of what they tell you they want into that store. You know the reason why: the group wants a Trader Joe's so bad in Palm Springs they're willing to work for it. We know Fresh & Easy is new, but we don't hear any groups--or even a single Plam Springs resident--creating much of a demand for one of your stores. We mean no offense; just telling you what we have learned.

Tesco needs to localize Fresh & Easy's style and merchandising mix

This gets us to the major point we're trying to make to Tesco's Fresh & Easy Neighborhood Market in this piece, with the help of the Palm Springs coaltion, who provide a perfect real life example. That point is: Tesco seriously needs to localize its Fresh & Easy stores more, including parts of the store design, its offerings, and its product mix.

We think Tesco can use its basic Fresh & Easy format as the template. However, within that basic template or blueprint, the stores need to be given more local positioning and a sense of place. For example:

>Design and sense of place: Tesco needs to put the "Neighborhood" in Fresh & Easy Neighborhood Market stores. The stores are supposed to be neighborhhod grocery stores, where people shop around, spend time, and buy a cart full of groceries. Rather, from our observation people are shopping the stores in the main like they do basic convenience stores. In other words, just buying a few items on their store trips. We bet the stores' average ring, an important food retailing metric, bears us out on this.

Tesco also needs to create some warmth, and more of a sense of place in the Fresh & Easy stores. We suggest one way Tesco can create this needed sense of place in the stores is to borrow a page from Tesco stores in the UK that have "Tesco Cafes," in-store cafe's like those so common in many American supermarkets today.

Since Fresh & Easy Stores are small (10,000 -to- 13,000 square feet on average) the "Fresh & Easy Cafe" can be smaller than those in supermarkets. We suggest an intimate, approximately 600 square foot petite cafe inside the store (not all stores neccessarily) as one way to create a sense of place in the grocery markets, as well as to encourage shoppers to spend more time in the stores. For example, Starbucks has numerous cafe's this size in supermarkets and in chain bookstores. They are very successful and add to the supermarket's or book store's overall sense of place, along with allowing customers to linger, and buy more.

Localization within the format template: The Western U.S., especially California, is the U.S. mecca for specialty and natural foods, groceries and other products. It has more producers in these categories than any other region in the country. It's also the per-capita number-one region (California the number-one state) in terms of specialty, natural and organic products consumption. California is the food products' trend setter; south and north. And "local" is big, no huge, in California among consumers.

However, when you walk into one of the numerous Fresh & Easy grocery stores in Southern California or Arizona, you see none of these facts and phenomenon's represented. No major offerings of southwestern foods in the Arizona stores, no extensive "made in California" merchandising in the Southern California stores, and no focus on the many local, artisan food and grocery product purveyers who populate both states in droves.

[Note: California also is the nation's number one and its most diverse agricultural producing state. California (and Arizona) consumers love large displays of fresh, bulk produce. It's what they are used to. That's one reason they love the state's many farmers' markets so much. The packaged fresh produce--which Fresh & Easy gets in bulk from suppliers and then packages at its distribution center--isn't going to make it, especially in California. If Fresh & Easy were to go to a quality, bulk fresh produce merchandising scheme instead of the current packaged one, we believe they would see at least an immediate 30%-40% increase in sales in the fresh produce category.]

The local angle plays a strong part again here with fresh produce. California has a bounty of fresh fruit and vegetable growers. In fact, Southern California is full of them. However, visit a Fresh & Easy grocery store in Southern California, and you're hard-pressed to find anything in the way of "locally-grown" fresh produce. That's a huge marketing mistake.

[Note to Fresh & Easy: Tip O' Neill, the famed former Speaker of the U.S. House of Representatives, was famous for saying: "All Politics is Local." He never lost an election, including the one among all his "local" fellow Congressman that made him Speaker, by remembering and practicing that motto for about 60 years in politics.

To paraphrase Tip O' Neill from a Fresh & Easy perspective: in the Western USA--especially in California--"Local is King." This doesn't mean Fresh & Easy must throw away the format. What it does mean is that success will come when the grocer uses that format as its template--and then localizes its stores to reflect a given community's history, culture, present and demograpics. This is one important key to Whole Foods Market, Inc.'s sucess. They even "localize" stores to neighborhoods within the same city, while keeping their basic format blueprint intact.

This localization needs to include design elements to the stores in addition to the product mix. For example, Tesco has signed leases for 18 stores in Northern California to date. The stores are to be opened in late 2008 or early 2009. Among those 18 stores include markets in San Francisco, Oakland and Napa.

These three cities offer perfect examples to explain the importance of localization within the format template. Each city has a rich and unique history, as do most California cities. Napa is America's premiere wine growing and producing region, as well as the country's number one place for specialty, natural and artisian foods innovation. We would hope a Napa Fresh & Easy store would reflect much of those facts in its design elements and product mix.

San Francisco, as we all know, is the culinary co-capital of the U.S., along with New York City. It's also a former gold rush town, and is today one of the top high-tech and internet-oriented business centers in the world. Additionally, San Francisco is a city of neighborhoods, each one having a distinct history and unique present. These elements should be reflected in any Fresh & Easy grocery store located in San Francisco. If not, San Francisco shoppers--who are major boosters of their city--will avoid the stores, branding them as just another cokkie-cutter chain.

Oakland, across the Bay Bridge from San Francisco, also has a unique history. Whole Foods' celebrated a major element of that city's history by building a store near the city's downtown that is designed like a European food hall, rather than like it's more typical format stores. The reason the grocer did this is the store's location sits right near a site that was a famous european-style food hall for decades, until there was a fire and the market, called Houswives Market, was eventually torn down. Despite this customization, Whole Foods still was able to use its basic format blueprint.

A Fresh & Easy in Oakland (there are three on tap thus far) need not be taken to this extreme in terms of localization--although Oakland loves its Whole Foods' Market Hall store. However, by not localizing the three stores to the history, culture and neighborhoods of Oakland, Tesco will likely decrease their odds of success with the stores in that city by at least 50% we believe.

Fresh & Easy needs some new direction

These are just a few examples of the direction we believe Tesco needs to go with its Fresh & Easy format and stores. There are a number of other suggestions we have based on lots of observation and research, but we will save those concepts and ideas for another time.

For now, using the Trader Joe's consumer demand phenomenon as a guide, it's our analysis that Fresh & Easy needs to do some serious evaluation of its format and operations, and to create more of a sense of place in the stores, localize the product merchandising mixes in the stores much better than they currently are, and institute a store design localization element, whereby the stores better reflect the history, culture and the present elements of the community and neighborhood they are located in.