Analysis & Commentary: Should Tesco's Fresh & Easy Put An Asterisk Next to its Motto? Yes; Unless it Corrects Four Operational Omissions

The motto of Tesco's Fresh & Easy Neighborhood Market is: "Making wholesome food accessible and affordable to everyone."

The motto is based on Tesco's positioning of the small-format combination basic grocery and fresh foods' chain as being a neighborhood-oriented grocery store designed to serve all consumers as their primary or secondary (fill-in) shopping venue.

This premise is similar to that of most U.S. supermarket chains and mass merchandisers like Wal-Mart. In fact, the original definition and purpose of the supermarket was and is to serve as a one-stop food and grocery retail shopping venue for consumers, regardless of the size of the store.

Tesco's Fresh & Easy however differs in many ways in its operational focus from nearly all other American supermarkets. We aren't referring to the fact its stores are smaller than most U.S. supermarkets, or that is offers a limited assortment of products. Nor are we referring to its merchandising philosophy. There are many grocery stores and supermarkets that are smaller than Fresh & Easy, have different formats and the like.

Rather, we're referring to some of its operational policies that in our analysis make it look more like an elitist specialty store rather than a food store that makes wholesome food accessible and affordable to everyone, which is its motto and positioning.

Fresh & Easy's everyday prices on basic groceries, natural, organic and fresh food and grocery items are good. They are about the same price everyday as deep discounters like Wal-Mart and Costco, and overall a bit lower everyday than most of the competing supermarkets in its market regions of Southern California, the Las Vegas, Nevada Metropolitan region, and the Phoenix Metropolitan region in Arizona, where the current 75 Fresh & Easy stores are located.

However, unlike Wal-Mart and virtually every supermarket chain and independent in America (those that position themselves for everybody), Tesco's Fresh & Easy has a number of operational practices we argue make its claim of being a grocery store for everybody questionable, along with its motto of "Making wholesome food accessible and affordable to everyone" not ring true.

In particular, lets examine four key operational practices (or exclusions) of Tesco's Fresh & Easy which we believe make this point.

Fresh & Easy doesn't accept (paper) personal checks

Virtually every supermarket and mass merchandiser that positions itself to serve all consumers in the United States accepts paper personal checks from shoppers. But not Tesco's Fresh & Easy Neighborhood Market You can pay for your purchases at Fresh & Easy with a debit or credit card - but not with a personal check.

According to surveys conducted by the American Association of Retired Persons (AARP), the national association for older Americans, over half of its millions of members aged 65 and over say they prefer to pay for their purchases at the grocery store with paper personal checks rather than debit or credit cards. Additionally, a significant percentage of those over 70-years old have said they don't even use debit cards. Many who rely only on social security have neither debit or credit cards. Other than using cash, paper personal checks are their only means of payment.

This is a fact not lost on America's banks. The banking industry would love to eliminate paper checks completely. However, because of the preference of primarily older Americans, the wealthiest and fastest growing segment of the population in the U.S., they don't.

Therefore, Tesco's Fresh & Easy is excluding the preferences of America's fastest growing population, those 65 years of age and over, by not accepting paper personal checks in its stores. As a result, the retailer's motto: "Making wholesome food accessible and affordable to everyone," has to be qualified by saying: "Except for the 50% of American consumers age 65 and older who say they prefer using paper personal checks to pay for their groceries at the supermarket.

Fresh & Easy doesn't cash payroll checks

Virtually every supermarket in America, along with Wal-Mart, cashes payroll checks for customers. In fact, most grocery retailers welcome and encourage it because the retail food industry figured out a long time ago it is a great way to create and keep primary customers.

Mega-retailer Wal-Mart even lowered it's payroll check cashing fees earlier this year to encourage more consumers to cash their payroll checks at its stores. Supermarkets (a total of about 6,000 stores) owned by America's three largest grocery chains, Kroger, Supervalu and Safeway, all cash payroll checks in the stores.

Previously Wal-Mart charged a minimum of $4 to cash a payroll check. Then, based on the amount of the check, a percentage charge was added in various increments. But earlier this year Wal-Mart went to a flat $4 fee regardless of the size of the payroll check as a way to encourage more consumers to cash their checks and do business with its stores. Many supermarkets wave the customer fee to cash payroll checks with a minimum dollar amount purchase.

Wal-Mart and America's supermarkets consider cashing customer payroll checks as a customer service, as well as a way to create shopper loyalty.

It's a fact that millions of working poor in the U.S. don't use banks. They cash their payroll checks at a Wal-Mart or a Kroger-owned store, or at other supermarkets (including their local independent), buy groceries, and then use the rest of the money to pay their bills. By cashing these checks for no or a minimal fee, supermarkets save workers who don't have bank accounts money because the only other alternative is to go to check cashing stores, which charge the worker a huge percentage of the check's value to cash it.

Tesco's Fresh & Easy doesn't cash payroll checks for the same reason it doesn't accept personal paper checks. That reason is because it believes there is a labor savings from not having to process the paper vouchers and checks. There is a labor savings from not doing so. But we argue the benefits of doing so far exceed the savings, as does Wal-Mart and nearly every other supermarket chain in the U.S. believe is the case.

Additionally, Fresh & Easy's self-service front-end checkout system also plays into this decision, since processing the paper checks and vouchers generally require employee assistance. Ironically though Fresh & Easy seems to have no problem handling its own $5-off paper coupons, which it distributes via the mail and in the stores.

Not cashing payroll checks, which is Tesco's right not to do, like virtually every American supermarket chain does, is another element that makes living up to its motto: "Making wholesome food accessible and affordable to everyone, rather difficult to do, in our analysis. (The asterisk here is: All consumers except those low-income workers who would like to be able to cash their payroll checks at a Fresh & Easy store like they do at Wal-Mart, Safeway or Kroger but can't do so, and therefore won't likely shop in the Fresh & Easy stores because they will shop where the retailer will cash their payroll check.)

Fresh & Easy doesn't accept W.I.C. vouchers

The U.S. federal government gives the lowest of low-income (many have no income at all and are on welfare) mothers what are referred to as W.I.C. (Woman's, Infants and Children's Program) vouchers to help them purchase nutritional food for their infants and toddlers.

Unlike food stamps, which can be used by low-income Americans in that federal aid program for a wide variety of food products, W.I.C. vouchers are only distributed to mothers, and can only be used at the supermarket to buy specific items such as infant formula, whole milk, cereals, certain types of juices, some varieties of fresh fruits and vegetables and a few other healthy foods. The paper W.I.C. vouchers are given to these low-income mothers for no charge. Retailers redeem them just like a check, getting the full-dollar face-value amount from the federal government.

Tesco's Fresh & Easy, unlike Wal-Mart and virtually every chain and independent supermarket in the U.S., does not except W.I.C. vouchers in its stores. Some convenience stores, farmers markets and drug stores in the U.S. also except these vouchers from poor mothers.

The primary reason Fresh & Easy doesn't except W.I.C. vouchers is for the same reasons it doesn't except personal or payroll checks. Those reasons as mentioned above are because a part of Tesco's model with Fresh & Easy is to eliminate the processing of paper, as a labor and thus cost-saving method, along with its self-service checkout system, which isn't designed for customer service.

Fresh & Easy stores except debit and credit cards. They also take U.S. government food stamps because those now are distributed to people in the form of plastic debit-type cards rather than in a paper form as they have been in the past. Stores process the plastic card like they do a debit or credit card.

By not excepting W.I.C. vouchers from the poorest of the poor mothers, we argue Tesco's Fresh & Easy isn't living up to its motto of "making wholesome food accessible and affordable to everyone", unless that "everyone" has an asterisk next to it that says: "Besides poor mothers who would like to use their W.I.C. vouchers at Fresh & Easy stores to purchase essentials for their infants and toddlers...but can't."

Fresh & Easy doesn't accept manufacturers' coupons

Wal-Mart and every supermarket chain in the U.S. accepts manufacturers' "cents-off" coupons, those little paper squares of free money that arrive in consumers homes mostly in the mail or tucked in the Wednesday or Sunday newspaper. The coupons are increasingly available on the Internet as well.

Manufacturers issue these coupons for their branded products. Consumers redeem them in the stores for a discount. Retailers then ship the coupons to a clearing house and are paid back for the face value of the coupon plus a small handling charge. There is a certain amount of manual labor involved in processing the coupons by retailers. However, in many ways it's "free money" to them in that they are paid back the value of the coupons by the clearing house, which is then paid by the manufacturer.

Tesco's Fresh & Easy Neighborhood Market doesn't accept manufacturers' "cents-off" coupons from shoppers however. If you're a coupon-clipping shopper, which is a growing trend in the U.S. in the current poor economy, Fresh & Easy isn't going to be your neighborhood grocery store since the markets don't accept them.

A just-released survey from the U.S. Promotional Marketing Association's Coupon Clipping Council found that a whopping 89% of the consumers surveyed reported using manufacturers' "cents-off" coupons at the supermarket.

Even more significant, 97% of the 1,000 consumers surveyed who said they are primary shoppers in a family reported using the coupons for food, grocery and household items at the store.

Further, the coupon users in the survey report saving an average of seven percent on their total grocery bill by using the manufacturers cents-off coupons at the supermarket. You can read more about the survey here.

With soaring food and grocery price inflation in the U.S., numerous consumers who've never before used the manufacturers' coupons are turning to them as one way to save money at the grocery store.

While it's true Tesco's Fresh & Easy distributes it's own $5-off coupons good on any total grocery purchase of $20 or more, that's a different process than excepting manufacturers' coupons. Why? Because Fresh & Easy could stop issuing the $5 coupons at anytime, and will have to do so eventually if it expects to make any money in its stores. The manufacturers' coupons however are a constant, something consumers can always count on as a money saving choice if they choose to use them in the grocery store.

Fresh & Easy also issues the coupons because about 60 -to- 65% of the items sold in the stores are under its fresh & easy store brand label. However, that still leaves 35 -to- 40% of manufacturer branded items that shoppers could use the manufacturers' "cents-off" coupons for in order to save money on various items in the Fresh & Easy Neighborhood Market stores.

In fact, since less than half of the items in the stores are manufacturer brands, which means Fresh & Easy Neighborhood Market would receive far fewer manufacturers' coupons than a typical supermarket gets, we find it difficult to understand why CEO Tim Mason believes it would be too much of a labor expense (vs. the benefits of doing so) to accept the coupons in its stores.

Tesco's Fresh & Easy doesn't except the manufacturers' coupons for the same reasons it doesn't accept paper personal checks, W.I.C. vouchers or cash payroll checks: That elimination of manual paper processing combined with its self-service checkout system.

It seems to us though that even if only 50% of U.S. consumers, rather than the 89% in the survey, regularly use manufacturers' "cents-off" coupons, that's a huge percentage of the consumer population for Fresh & Easy to exclude by not excepting the coupons in its stores.

Can the motto, "Making wholesome food accessible and affordable to everyone" ring true if such a large percentage of consumers use manufacturers' coupons but yet aren't able to do so at Fresh & Easy Neighborhood Market grocery stores? You be the judge. We suggest it can't.

Conclusion

Our analysis isn't designed to suggest Tesco's Fresh & Easy doesn't have a right to not accept personal checks and W.I.C. vouchers from poor mothers, or to not cash payroll checks or accept money-saving manufacturers' coupons from shoppers. That's the retailer's choice. And it's the shopper's choice to shop where they can redeem their W.I.C. vouchers (in this case it is no choice) and manufacturers' coupons, use personal checks, an cash their payroll checks.

However, based on these four exclusions - operational practices that virtually every other American food and grocery retailer does as the norm - our analysis is that Tesco Fresh & Easy Neighborhood Market's positioning that it is a food store for everybody is incorrect, and that its motto: "Making wholesome food accessible and affordable to everyone," needs to have an asterisk in front of it.

That asterisk signifies that the for everyone excludes the following:

*Older consumers, and consumers in general, who prefer paying for their purchases with paper checks; or do not even have a debit or credit card.

*The working poor who don't have a bank and would like to cash their payroll checks at Fresh & Easy like they can at Wal-Mart and virtually all other supermarket chains...but can't.

*The poorest of the poor mothers who receive U.S. federal government WIC vouchers so they are able to purchase infant formula, whole milk, juices and other essential nutritious items for the children, and would like to shop at Fresh & Easy and use the vouchers...but can't.

*The tens of millions of American consumers who use and count on manufacturers' coupons to save them money on their groceries at the supermarket. Since they can't use the coupons at Fresh & Easy stores, their preference is essentially an exclusion from the everybody list.

Based on these excluded segments of the consumer population, everybody seems to have shrunk to perhaps half of everybody.

It's our analysis that Tesco's Fresh & Easy is losing out on a substantial amount of business by excluding consumers who prefer to use paper personal checks, cash payroll checks, redeem W.I.C. vouchers and use manufacturers coupons, but can't since the stores don't accept any of these four common transactional forms.

A real irony involves not taking the W.I.C. vouchers. One of Tesco's key strategies with its Fresh & Easy chain it says is to locate stores in low-income inner city neighborhoods like south Los Angeles and elsewhere that are currently underserved by grocery stores that sell basic groceries and fresh foods at reasonable prices. So far the grocer has located two (Compton and Eagle Rock) of its 75 stores in such neighborhoods in Los Angeles county and is building a new store in a low-income neighborhood in south Los Angeles.

What is ironic is it is just these low-income inner city neighborhoods where the majority of W.I.C. vouchers are distributed to poor mothers, many of them single mothers. Without the vouchers, which can only be used for the items stated on them, it's most likely that many of these mothers would not be able to purchase infant formula and other nutritious items for their children. The infants and toddlers would go without. That's why the program was created in the first place.

So, here you have a retailer with a strategy that says it's going to open food stores in these neighborhoods because it wants to provide the residents with better food choices, convenience and low prices, as well as make a profit as a grocer of course. Yet, it is in these very low-income, underserved neighborhoods where the neighborhood grocery store should take the W.I.C. vouchers because it will in most cases be the only decent food store available for residents.

Yet in the case of Fresh & Easy, it doesn't take the W.I.C. vouchers. Therefore, these poor mothers and their children will have a grocery store right in the neighborhood that offers basic groceries and fresh foods--including infant formula, nutritious cereals and fresh juices--at affordable prices but they can't shop at that store using their vouchers.

Therefore, they still will have to ride on the bus to the supermarket or Wal-Mart miles away that accepts the W.I.C. vouchers. Although we don't think it's intended by Tesco, there is a certain cruelty in that scenario.

Strategically Tesco's 'locate Fresh & Easy stores in food deserts but not accept W.I.C. coupons from poor mothers scenario' is like completing half of a puzzle and then declaring you are done. Not only is it incomplete but it makes absolutely no logical sense. Not to mention the poor public and community relations practice of not accepting the W.I.C. vouchers.

We suggest Tesco take a look at each of these four practices in light of its positioning for Fresh & Easy and its motto, which is: "Making wholesome food accessible and affordable to everyone." We think that asterisk is in order at present.

Or better yet, Tesco might consider completing the puzzle by including the four operational missing pieces described above in how it runs Fresh & Easy. If it does so, we think the current for everyone positioning and Fresh & Easy store motto would be warranted without the asterisk. If not, we urge the retailer to add that asterisk for the sake of full disclosure.

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

First in a Series. Today: Tesco's Fresh & Easy's - Retail Operations

Fresh & Easy Buzz has been writing of late about and offering analysis on the change in positioning by Tesco's Fresh & Easy Neighborhood Market to a more "value-based" retail positioning model, which is something we've been saying for over a year that the grocery chain needs to do. [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.]

However, we've always stressed a "value proposition," which is far more than just getting "down and dirty" on price, as Tesco Fresh & Easy CEO Tim Mason put it in a recent interview in the Sunday London Times. [February 26, 2009: Tesco Fresh & Easy, Research and Course Correction: What 'Was' Said and 'its' Context Matters Little; What 'Is' Matters Much, What's Done Matters More.] Although, in the current super-competitive aand recessionary food retailing climate in California, Nevada and Arizona, where Tesco's Fresh & Easy Neighborhood Market has its current 115 stores, getting "down and dirty" with low everyday prices and hot and deep promotional price offerings is a must -- regardless of what any other analyst might tell you.

Safeway is doing it. Kroger as well. Ditto on Supervalu.

Add Wal-Mart and basically all the other grocery chains to that list in these respective markets, as well as throughout most of the United States. Right now, "all grocers are discounters" in their own ways. Even Whole Foods Market, the natural-organic and premium grocer, is putting value above all else in its merchandising, marketing-promotions and operations right now. [August 4, 2008: The Value Proposition: Whole Foods Market's New Focus on 'Value' Demonstrates the Importance of the Value Proposition Currently in U.S. Food Retailing.]

But mere hot promotional pricing and advertising does not value make alone. That's something all grocer's need to keep top-of-mind, and most all successful ones do. [June 18, 2008: Tesco's Fresh & Easy and it's 'Value Proposition:' We Asked, They Answered; Discussion, Deconstruction and Fresh & Easy Buzz Analysis.]

Additionally, as we've detailed in Fresh & Easy Buzz for over a year, the problems Tesco has and is having with its small-format, convenience-oriented, combination grocery and fresh foods Fresh & Easy chain are far from exclusively price and promotional pricing-based. They involve other merchandising, marketing and retail operational omissions, mistakes and failures, which we've outlined in the Blog since December, 2007.

These problems, a theme we've been in the forefront of offering analysis and suggestions on regarding Tesco's Fresh & Easy, stem in our analysis from a failure to understand that food and grocery retailing in the U.S. (and in California, Nevada and Arizona) is a regional, sub-regional, sub-sub-regional and local business. [November 24, 2008: A Single Bird in the Ad (Even Wrapped in Bacon and Sage) Does Not Make For A Good Thanksgiving Promotion For A Neighborhood Grocer For 'Everybody.']

Like former Democratic Speaker of the House Thomas "Tip" O'Neill was famous for saying about politics, that "All politics is local," so to is it the case that "All food and grocery retailing in the U.S. must be locally-based," reflecting the unique democraphics, culture, history and local consumer behavior in the regions, sub-regions, sub-sub regions and neighborhoods where a retailer's stores are located.

This doesn't mean all U.S. food retailing is or should be done by locally-based independents. No indeed. What it means is that those chains that are successful in the U.S. generally put a serious and considerable focus on local and neighborhood merchandising and marketing in each of the market regions where they operate stores.

It's also why food retailing in the U.S. is, by-and-large, a regional business, with regional chains being the market share leaders in most regions of the country. Examples include Stater Bros in Southern California's Inland Empire region, Bashas in Arizona, and Save Mart and Raley's in Northern California. Each of these privately-held, regional chains is the number one, two or three market share leader in its respective regional and local markets. In fact, the only one of the four that isn't the market share leader in its respective market is bashas in Arizona. All do $3 billion-plus a year in sales. Save Mart does about $6.5 billion annually with about 230 stores.
It's also why the big chains like Kroger Co., Safeway Stores, Inc. and Supervalu operate multiple supermarket banners. Each of these three chains became semi-national food retailers not by organic growth, but rather through acquisitions of leading regional supermarket chains, nearly all of which were privately-held and built up by the local families or business people that owned them. And it is this local banner policy that helps them to be the market share leaders in the parts of the U.S. where they hold that status.

In Southern California, for example, that includes the number one and two market share leaders, Safeway Stores, Inc. and Kroger Co. Safeway-owned Vons was a privately held chain in Southern California before Safeway acquired it. Ralphs also was a privately-held chain, which was acquired by Southern California-basedsupermarket investor Ron Burkle's Yucaipa Companies in the 1980's, then acquired from Burkle by Kroger Co. in the 1990's.

The stength of the Vons' and Ralphs brands goes back to their privately-held, regional supermarket status, a status the owners of each of the chain's built by focusing on the local in Southern California. Safeway and Kroger realized this, which is why they never changed the names of the respective chains to "Safeway" or "Kroger."

Lastly, the local nature of food and grocery retailing also explains why multi and single-store independents are such a powerful and successful retailing force in the business in the U.S. It also expalins why, despite the long time and ongoing threat to independents from the mega-chains, the independent grocer sector continues to survive and even thrive. It's all about thinking and acting local in significant measure.

It's been our analysis for well over a year that unless and until Tesco realizes this fact about U.S. food and grocery retailing -- the regional, sub-regional, sub-sub-region and local nature of the business -- it will continue to miss the mark on creating a successful Fresh & Easy Neighborhood Market chain.

Ironically the word "neighborhood" is in the chain's name. But Tesco has yet to put the "neighborhood" in Fresh & Easy Neighborhood Market in terms of understanding and then acting on, with its merchandising, marketing and operations, the local natural of food and grocery retailing in America. [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.] [October 8, 2008: Putting the 'Neighborhood' in Neighborhood Market: 'Localism' and Tesco's Proposed Fresh & Easy Neighborhood Market in Sacramento's Oak Park.]

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Over the next few weeks, Fresh & Easy Buzz will be offering analysis of the current state of Tesco's Fresh & Easy Neighborhood Market in five key areas: (1) retail merchandising (today's focus) (2) merchandising, (3) marketing-promotions, (4) format, and (5) store location strategy, along with offering suggestions for changes the grocer should make, in our analysis, going forward in each of these respective areas, combining them all into a whole.

Nearly all of these suggestions we write about today and will write about in the upcoming stories are ones we've made in one form or another for about a year. We will add some new suggestions in the upcoming pieces.

Today, we focus on the retail operations area in the piece below:

As we mentioned earlier in this piece, Tesco needs to make many more changes -- all then tied into a comprehensive, defined Fresh & Easy format, with a clear and solid merchandising, marketing and operations strategy, which is then communicated to consumers in a comprehensive manner -- rather than merely getting "down on dirty" on its promotional pricing, which is something though it does need to do right now, but is only one tactic in what needs to become an overall strategy.

The most basic, needed and logical "no brainer" changes Tesco should make -- and can make rapidly -- are in its retail store operations policy and practice.

Below are seven retail operations changes, which we first offered about a year ago and have continued to regularly write about, that Tesco should make.

The changes were important for Tesco to have made (which it didn't) in the non-recessionary period in which we first made them over a year ago. They are even more important now, in the current and likely to last for probably all of 2009 and 2010, economic recession

The Seven retail operations changes Tesco's Fresh & Easy needs to make:

1. Accept WIC Vouchers (Women's, Children's & Infants Program) issued by the U.S. government to the poorest of poor mothers. [September 7, 2008: Analysis & Commentary: Should Tesco's Fresh & Easy Put An Asterisk Next to its Motto? Yes; Unless it Corrects Four Operational Omissions.]

The U.S. government issues WIC Vouchers, which come in a paper form that looks similar to a check, to the poorest of poor mothers so they are able to purchase infant formula, whole milk, cereals and related nutritious and healthy-oriented foods and beverages for their infants and toddlers, as well as for themselves. The federal government is in the process of expanding the varieties of healthy foods mothers can buy with the vouchers. Some of the new categories will include more fresh produce and additional whole grain cereals and breads.

Tesco's Fresh & Easy stores do not accept the WIC vouchers from poor mothers. What a mistake. By not accepting the vouchers, the grocer excludes an entire group of potential customers. These potential customers also tend to purchase other food and grocery items with food stamps and cash at stores that accept the WIC vouchers.

In the current recession, distribution of the WIC vouchers has and is dramatically increasing. Additionally, the $787 billion economic stimulus bill recently signed by the President allocates additional funds for WIC because of the increased demand for the assistance, including from many mothers not previously needing WIC.

All of Fresh & Easy's major (and most minor) competitors accept WIC. So should Tesco's Fresh & Easy. Why turn down a potenital sale, after all? Particularly for a grocer that needs such sales. Lastly, accepting the WIC vouchers is the right think to do for Tesco from a social responsibility standpoint. WIC is a part of the relationship between the U.S supermarket industry, the federal government and American citizens -- part of the socioeconomic compact.[December 29, 2008: Tesco's Fresh & Easy, 'Food Deserts' and WIC Vouchers; A 'Year-End' Analysis & Commentary.]

2. Accept manufacturer's "cents off" item coupons. Fresh & Easy stores don't accept the the popular coupons issued by food, grocery and consumer packaged goods manufacturers and marketers, which allow consumers to receive anywhere from a 25-cent to a $1 disount (and at times buy-on-get-one-free and other offerings) on food, grocery and related items. [December 12, 2008: Marketing & Promotions Report: Manufacturers' Coupons Becoming the 'New Black;' Use Among Consumers Soaring; Marketers Distributing More Than Before.]

All of the grocer's competitors accept them. Many like Kroger-owned Fry's (Arizona) and Albertson's (Southern California, Arizona) even promote acceptance of the coupons aggressively, by regularlydoubling and even tripling the manufacturer's coupons in special promotions.

Consumers are using the manufacturers' "cents off" coupons, and shopping at stores that accept the coupons, in greater volume than at anytime in recent history. Manufacturers'-marketers are distributing the coupons in greater volume today than they have been doing for many years -- if not in history.

Can Tesco's Fresh & Easy really afford to exclude coupon-clipping shoppers, and their dollars, from its customer mix? We think not, particularly since the use of the coupons is so fast- growing in the recession. But even in a non-recession accepting the manufacturers' coupons is a "no-brainer."

Some might argue that since about 60% of the items sold in Fresh & Easy stores are under its store brand, that taking the coupons doesn't make since. We beg to differ. That leaves a potential universe of 40% of the items sold in the stores available for manufacturers' "cents off" coupon shoppers. Again, a "no brainer."

3. Accept paper, personal checks. It's near-impossible to find a major supermarket or grocery store in California, Nevada and Arizona (or elsewhere in the U.S.) that doesn't accept paper, personal checks. Tesco's Fresh & Easy doesn't accept them; only cash, debit cards and credit cards.

Many supermarkets would love to stop taking paper, personal checks. But they don't, and won't anytime in the near-future.

Why? A couple reasons:

>Too many consumers in the 55-plus age bracket still prefer using paper checks to using cash, debit cards or credit cards to pay for their groceries.

>Additionally, the U.S. supermarket business is all about creating options. The industry has become successful in large part by increasingly offering shoppers multiple options to pay for their grocery purchases. That's why the industry finally began taking credit cards in the 1980's after holding out on doing so for many years after they were introduced.

And in the current recession, more and more consumers are going back to paying for their food and grocery purchases with paper. personal checks for two reasons:

>It allows them to better control the amount of money they spend at the supermarket. It's just too easy to add an extra $20 (or more) on that debit card, as we all know.

> In the case of credit cards, many consumers have maxed-out their credit limits. Many consumers also have had their credit limits reduced by banks because of the credit crisis.

>Lastly, consumers are getting smart. They know that paying for essentials like food and groceries with a credit card is a prescription for even more debt than they already have. Therefore many have stopped using the plastic at the supermarket. The savings rate in the U.S. is also up, another indication that American consumers are using their credit cards less. Additionally, retailers like Wal-Mart, Target and a few others have recently reported shoppers using credit cards far less in their stores, particularly for essential food and grocery items.

By not taking paper, personal checks, Tesco's Fresh & Easy is excluding potential customers who prefer this method of payment.

The food retailing business is not one in which you can force consumers to use payment methods that the retailer prefers. Rather, it's all about offering a wide-variety of payment options so as to draw shoppers to your stores.

Can Tesco's Fresh & Easy really afford to say to consumers who prefer using paper, personal checks "no thanks, we don't accept them"? We think not. But the grocer's competitors love it.

4. Cash payroll and government-issued checks. Wal-Mart, Safeway (Vons and Safeway banners in California, Nevada and Arizona), Kroger (Ralphs, Fry's, Smiths), Supervalu (Albertsons), Bashas and nearly every other food and grocery retailer in California, Nevada and Arizona, cash shoppers' payroll checks -- and even encourage the practice. Tesco's Fresh & Easy doesn't.

Why do these grocery chains cash payroll checks? Because it brings added business to a store, and thus to a grocery chain's overall sales numbers.

Wal-Mart even lowered the amount of money it charges to cash payroll and government (Social Security, SSI, Veterans, Unemployment, Welfare) checks to $4 last year, regardless of the check amount, as way to encourage consumers to bring their checks to a Wal-Mart store and cash them. Prior to that change in 2008, the greater the value of the check, the more Wal-Mart charged to cash it.

But, Tesco's Fresh & Easy does not cash payroll or government-issued checks, as a matter of the company's retail operations policy.

Unemployment is unfortunately booming in the U.S., particularly in California (over 10% for February), Nevada and Arizona, which are among the hardest three states hit by the housing foreclosure mess, the financial crisis and the recession in general.

Tens of thousands of new people are going on unemployment in the three states each month.

Many people receiving unemployment checks cash them at the supermarket -- just like many people do with their other government-issues checks, as well as payroll checks -- and then buy their groceries at the store after cashing the checks. Kroger and Safeway owned stores even in most cases cash the checks for free with a minimum purchase.

None of these thousands of consumers are cashing their payroll or government-issues checks at Tesco Fresh & Easy stores, and then buying groceries with the cash though, since the grocer does not cash such checks.

This pleases Wal-Mart, Safeway, Kroger, Supervalu, Bashas, ect. though. They love the added business that cashing payroll and government-issued checks bring their respective stores.

5. Add two full-service checkout lanes in each Fresh & Easy store.The Fresh & Easy stores offer only self-service checkout in which shoppers must scan and bag their own grocery orders. Store clerks then collect the customer's cash or process her debit or credit card transaction. In other words, the clerks still have to make change for cash purchases or process the card transactions.

If asked the store clerks also will (cheerfully) assist shoppers with checkout. But anyone who has any experience in the U.S. food retailing business knows customers hate asking such things, particularly since they get full service, in many cases including carryout service to their cars, at stores that offer as good or better prices than Tesco's Fresh & Easy stores do.

Tesco said their "research" showed shoppers would love this self-service model. A few do. But a "few" shoppers that love a particular feature like forced self-checkout don't make a successful grocery chain. [May 20, 2008: Take One Dose of 'Internal Research', Add An 'Independent' Survey From An Unnamed Source, and You Get A Consumer Preference For Self-Service Checkout.]

Most shoppers don't like a self-service-only forced choice by a retailer though. And many who tried it once or twice, according to our research, have never set foot in a Fresh & Easy store again. This is particularly the case with consumers in the 55-plus age bracket -- you know, the ones who have the most income and wealth in the U.S. and just happen to be the fastest-growing demographic.

Tesco should add two full-service checkout lanes in each of its Fresh & Easy stores. This would be smart in that it would welcome all those shoppers who hate the self-service-only system. Doing so creates "choice" rather than trying to force "choice" with self-service-only checkout. Ask you local consumer researcher if "choice" is a key element of American consumers. Yes, yes and yes, it is.

Additionally, adding the two full-serve checkout would also create a larger potential customer base for the Fresh & Easy stores, since self-checkout-only is a barrier to entry for many shoppers from the start. Why exclude?

At the same time, adding the two full-service checkout lanes would still allow Tesco's Fresh & Easy to keep a partial self-service checkout system, preserving for the most part its cost-cutting model. Of course, if the full-service lanes prove much more popular than the self-service, then we would think additional conversions would be warranted. There's only one way to find out -- convert two of the existing self-service checkout lanes to full-service.

Adding these two full-service lanes would also provide a simple operational system for accepting items number one, two and three in our list -- the paper WIC vouchers, paper manufacturers' "cents off" coupons, paper, personal checks and payroll and government-issues checks.

For example, all Fresh & Easy needs to do is put signage in the front-end checkout area of the stores that lets shoppers know in advance of checking out that if they are using the WIC vouchers, paper manufacturers' coupons or paper personal, payroll or government checks (or any combination of paper methods of payment and coupons) that they should then go to one of the two full-service checkout lanes.

If this proves to create too much traffic in those two lanes, then it isn't difficult to also accept the paper methods of payment at the self-serve checkout lanes. We probably would create a system to do both. But that's a simple logistic task that doesn't take much to implement. [July 14, 2008: Breaking News & Analysis: CA Assemblyman Introduces 'Tesco Fresh & Easy Law' to Ban Stores With Self-Checkout-Only From Selling Alcoholic Beverages.]

6. Add paper grocery sacks to the stores rather than offering only free single-use plastic bags, the "Bags for Life," which are reusable, synthetic bags sold for 20-cents each, and the more expensive canvas reusable bags (which start at 99-cents each).

This is all about offering customer choice.

Many consumers hate the single-use plastic bags. That's why nearly 100% of all U.S. grocers offer the "paper or plastic option."

Additionally, even though we like the 20-cent each reusable "Bags for Life," the fact is many shoppers just don't want to pay 20-cents for a bag, or two or three or four, so they go by default with taking the free plastic single-use carrier bags at Fresh & Easy. But many of these shoppers would go for paper if it were available.

Fresh & Easy should add the paper carrier bag option, even if it has to charge 10-15-cents per bag for it.

We wouldn't charge for the paper bags unless we also charged for the single-use plastic carrier bags though. The reason being that charging for one suggests favoring plastic over paper. That's a bad message to send.

Instead, if the grocer has to charge, which is what small-format, hard-disount grocery chain Aldi does, for example, then charge 10-cents each for both paper and plastic -- or offer both for free. Then give each shopper 5 cents back for every paper bag they bring back to the store, like many other grocers do. Also continue to push the reusable bags.

We favor the promotion of all kinds of reusable carrier bags, and Fresh & Easy is doing a good job at it, offering a range of bags from 20-cents each (the "Bags for Life), to 99-cents (an inexpensive cotton carrier bag) on up. But that fact is consumers aren't yet taking reusable bags to the store in any significant numbers. Therefore, offering both the paper and plastic option remains a smart thing for any competitive food and grocery retailer to do. [August 13, 2008: Tesco to Offer Shoppers Free Plastic Bags in UK Stores Only if Requested; Still Offering Plastic Bags-Only in Fresh & Easy USA Stores; No Paper Option.] [Click here for more posts on the subject.]

7. Add small, "neighborhood" customer assistance and service kiosks to each Fresh & Easy store.

Like the other six operational changes suggested above, this also is one we first suggested about a year ago. It's really more of an operational addition rather than a change though.

It also serves an additional, overall positioning purpose for Tesco's Fresh & Easy in that it helps put the "neighborhood" in Fresh & Easy Neighborhood Market.

We suggest that in each Fresh & Easy store Tesco install a small kiosk type area in the front-end of the store. This kiosk would be staffed by a store clerk. The kiosk would be used as a "neigborhood" and store informational center. Neighborhood groups could have the store distribute their information at the kiosk. The store could also distribute coupons and other information at the kiosk, like its literature and related materials for its store charity prograsm and "shop for schools."

The kiosk also could be used to pre-approve paper, person checks and either to pre-approve or even cash payroll and government-issued checks. That way time would be saved by shoppers and store clerks at checkout.

Additionally, Tesco's Fresh & Easy could use the "neighborhood" store kiosks to sell a selected variety of products, both for store sales as well as community and neighborhood assistance.

On the community-neighborhood side of the equation, sales could include things like bus and other mass-transit passes, tickets to local events and fund-raisers, along with related communitiy-based products. (We don't mean consumer packaged goods by products. BUt rather the type of things we describe.)

In terms of products for added store sales, items could include: pre-paid cell phones and phone cards, local area maps, Fresh & Easy gift cards, Fresh & Easy coupon books (a new creation) and other, similar products that could evolve over time.

These store "neighborhood" kiosks, which would be small and take up very little floor space, serve multiple purposes.

First, they assist with the check cashing process, as mentioned above. Additionally, they allow Fresh & Easy stores to add some incremental sales by selling the types of products mentioned. Further, they offer an added customer service element to the stores, and to the neighborhoods, and from a longer term positioning standpoint. Lastly, they help to better communicate what Tesco says is a central position of the Fresh & Easy format, which is to be the "neighborhood grocery store."

Safeway Stores operates similar customer service centers at the front-end of most of its stores, for example. Customers love it and it works out very well for store operations.

Adding the "neighborhood" service kiosks in the Fresh & Easy stores also would help add a better "sense of place" to the stores, something that we've been saying for over a year in our analysis is much needed. Remeber, the whole is more than the sum of its parts in food retailing.

Conclusion

Tesco's retail operations policy is a top-down, command-and-control-style model.

The policy says to shoppers: We want you to shop at our Fresh & Easy markets as long as you are willing to" pay with cash, debit and credit card only; aren't a poor mother who needs to use WIC coupons to feed her kids; are willing to not use manufacturers' "cents off" coupons to save on your grocery bill; are willing to scan and bag your own grocery order; and a will accept single-use plastic bags only, or pay for your own bag, but not be offered paper bags, even if that is your preference.

That's a mouthful.

On the other hand, all of Tesco Fresh & Easy's competitors say in their policies, which are bottom-up (choice) rather than top-down policies: We invite you to shop at our stores by offering you as many ways of paying for your grocery purchases as we can think of offering -- cash, paper checks, cashing payroll checks, credit cards, debit cards.

Their policies also say: We also invite you to use manufacturers' coupons to save money on your total grocery bill. We provide full checkout service (and in a few cases offer the option of self-checkout along with it). We offer you a choice of paper or plastic bags (and in many cases will carry the groceries out to your car), along with selling a variety of reusable bags. And we invite poor mothers to use their WIC vouchers in our stores. Your money is as good as anybody elses. And we treat you fairly.

Compare and contrast the two retail operations strategies and policies -- Tesco Fresh & Easy's and all the others. Which one seems like it would induce the greatest number of potential consumers to shop in a grocery chain's stores?

American consumers love choice and options. For that matter, even former Sovet Block nation consumers in Eastern Europe like and demand more choice than the Tesco Fresh & Easy command and control retail operations policy provides, despite having lived under command and control economies until recent times.

One of the positioning elements of the Tesco Fresh & Easy stores is that they are "for everybody." The grocer says the stores are for all consumers; that they are neighborhood markets where Tesco wants people to do the majority of their grocery shopping at. That's the positioning.

But how can a retailer say it's stores are for "everybody," all consumers, when its retail operations policy excludes so many by limiting choice? The answer is, it can't.

There's a major disconnect between what Tesco says is the positioning of the Fresh & Easy stores and what's its retail operations policy is. By making the changes we offer, the grocery chain can go a very long ways towards making a better connection between what it wants the Fresh & Easy stores to be and what its operations strategy and policy has created.

Food and grocery retailing is a wholistic and comprehensive process and strategy. You can't just tinker with one element of merchandising or marketing, for example, if their are problems, and expect doing so to solve those problems.

This gets us back to the value proposition concept and practive. Tesco Fresh & Easy Neighborhood Market CEO has indicated the grocery chain has discovered it needs to compete better on promotional pricing, as well as adopting some elements of what we've been saying it needs to do in terms of the value proposition. But remember, value isn't just hot pricing.

Because of its consumer-limiting retail operations strategy, policy and practice, it's our analysis that what Fresh & Easy could likely end up doing, unless it makes the changes we suggest and creates a pro-customer-choice environment for its stores, is that by offering the hot promotional prices it has started offering (which we agree with as part of a wholistic strategy), is to create a class of "cherry-picking" shoppers, who just shop the stores for the promoteddeals, then go elsewhere to one (or more) of Fresh & Easy's competitors to buy the rest of their food and groceries.

The reason behind this is because many shoppers will shop a store if it has a few deals with prices so hot they just can't pass them up. But they won't spend much time in that store, and spend money on other items that are more profitable for the retailer, if that particular retailer has created a retail operations policy and practice that so limits customer choice that it alientates shoppers, which we argue Tesco has done with its command and control policy at Fresh & Easy.

The whole -- retail operations, merchandising, marketing -- after all, is much greater than the sum of its parts -- offer hot promotional deals and all will be solve -- in food and grocery retailing.

Making the seven simple retail operations changes we detailed above, as we've argued for some time now, will also add sales to Fresh & Easy, along with opening up a much larger potential customer base for the stores than currently exists.

Adding sales, creating more customers -- isn't that what it's all about? Indeed it is. It's a "no brainer."

Breaking News & Analysis: CA Assemblyman Introduces 'Tesco Fresh & Easy Law' to Ban Stores With Self-Checkout-Only From Selling Alcoholic Beverages

California State Assemblyman Hector De La Torre, a Democrat who represents South Gate in Southern California, has introduced legislation that if passed would ban the sale of alcoholic beverages at stores in California that offer only self-checkout lanes.

Tesco's Fresh & Easy Neighborhood Market is the only food, grocery or convenience retailing chain (or even significant independent we can find) thats stores offer only self-checkout. As a result, it's fair to call the Assemblyman's proposed self-checkout only stores alcohol sales ban the "Tesco Fresh & Easy law."

The bill, AB 523, would if passed only affect Tesco's Fresh & Easy therefore, since we've been unable to find any significant-sized food and grocery retailer in the state that offers only self-checkout in its stores.

All of the current 62 Fresh & Easy stores in California, Nevada and Arizona (more than half of the 62 stores are in Southern California )sell beer and wine. Further, Tesco's Fresh & Easy has numerous varieties of its own proprietary-blended wines which it sells in its stores. Wine sales are a significant element of Fresh & Easy's merchandising strategy, as it is attempting to position the small-format grocery stores in part as destination retail outlets where shoppers can buy high quality wines at affordable prices as part of the grocery markets' overall mix.

California's Alcohol Beverage Control Department (ABC) told Fresh & Easy Buzz today that it has yet to request a copy of the proposed legislation from Assemblyman De La Torre's office. A department spokesperson added the legislation isn't something the department, which is in charge of regulating alcohol beverage licensing and sales in the Golden State, is seeking.

AB 523, the legislation to ban stores only offering self-checkout from selling alcoholic beverages, is sponsored by the Marin Institute, a San Rafael-based alcohol industry watchdog group. Assemblyman De La Torre, who is carrying the legislation for the group, introduced the bill on June 23 in the State Assembly.

Under current California law, self checkout grocery lanes are designed to freeze up whenever a shopper self-scans an alcoholic beverage item or pack. A store clerk then has to come to the checkout stand and check the customer's identification card to make sure he or she is over age 21.

However, Michael Scippa, who is the advocacy director for the Marin Institute, the sponsor of the legislation, says self-checkout lanes make it easier for minors to buy alcohol, as well as make it easier for adults already intoxicated to more easily purchase alcoholic beverages (which is illegal for them to do in California) because he says evidence suggests it's difficult when a store is busy for store clerks to monitor multiple self-service checkout lanes at the same time.

"It's just not going to be possible for one person to monitor five or six checkout lines without someone slipping by," Scippa said. "I think it's a prescription for increasing underage consumption, a recipe for more binge drinking," Mr. Scippa said in a statement.

An analysis of the bill by the Senate Governmental Organization Committee however says "ABC staff indicates that they have no evidence of any problems associated with minors purchasing alcoholic beverages through self-service checkouts."

Chris Albrecht, legislative officer with ABC, says the ABC ran a field operation in the Long Beach area in Southern California earlier this year in which it had several teenaged volunteers attempt to buy alcohol at self-service lines. In each case, Albrecht said, the systems worked as designed and prevented the sale. These stores included Southern California Fresh & Easy grocery markets.

"We have not seen evidence of a systematic problem in the industry with allowing consumers to conduct part of those transactions on their own," Albrecht said. "We've gotten no complaints about their (self-checkouts only) use leading to sales to minors," Albrecht says in the report.

If passed, AB 523 would require Tesco's Fresh & Easy to change from having all of the checkout lanes in its stores to having a least one full-service checkout lane dedicated in each store, which shoppers buying alcoholic beverages would have to use. This is mandated in the proposed legislation for any and all retailers using a 100% self-service checkout model in their respective stores.

Retailers that offer both self-service and full-service checkout lanes would merely have to put a sign on the self-service lanes in the stores, stating that if a customer is buying alcoholic beverages they are required to use the full-service checkout lanes.

The legislation, which was just introduced on June 23, is working its way through the appropriate committee system route in the California State Assembly. IT has to pass various committees in the State Assembly, then do the same in the State Senate, and then be signed by the Governor in order to become law. The bill, like all others, can be amended all along that route.

UFCW union to support AB 523

Fresh & Easy Buzz has learned the UFCW union will likely come out in full support AB 523, the self-checkout only alcohol sales ban, in the next few days. Tesco's Fresh & Easy is a non-union food and grocery retailing chain, as is Trader Joe's, Wal-Mart and Whole Foods Market in California, along with a few other minor, smaller retailers. All of the state's top supermarket chains and nearly every major independent are unionized food retailers.

Tesco's Fresh & Easy Neighborhood Market USA, which is based in Southern California, hasn't issued a public written statement on the proposed legislation to date. In fact, we've learned the grocery chain might not even be aware of the proposed bill.

Reasons for the legislation

Assemblyman De La Torre's office, when asked for a few reasons why the legislator is proposing the bill, sighted websites which instruct teenagers on how to scam self-service checkout lines to steal or buy alcohol, along with listing the reasons offered by the Marin Institute, for sponsoring the ban.

One of the websites mentioned by the Assemblyman's office is stealthiswiki.com, which offers advise on ways to shoplift and buy alcohol to underage teens. The site even has a section about Tesco, as well as on various other stores which offer self-service checkout.

Here's a quote from the website: "In most small stores, there will be one (extremely bored) clerk per four terminals." It then goes on to detail ways to pay for one item and walk out with another, along with other "tricks," for example.

It would appear this proposed self-service-only checkout alcohol sales ban legislation is the last thing Tesco's Fresh & Easy needs at present from both operational and public relations standpoints.

The grocery chain is currently trying to increase sales and margins in its stores, of which many continue to underperform in terms of corporate sales targets.

Additionally, Tesco is in the midst of a very aggressive campaign being conducted by the United food and Commercial Workers (UFCW) union, which we've reported on extensively in Fresh & Easy Buzz, designed to get Tesco PLC and Tesco Fresh & Easy senior executives to meet with union leaders to discuss the possible unionization of the Fresh & Easy Neighborhood Market USA chain.

Third, Fresh & Easy also is in the process of opening 30 new stores, the majority of which are in Southern California, over the next 90 days. Every one of those new stores will have self-service checkout only and sell beer and wine, just the all of the current stores do.

Further, Tesco's Fresh & Easy has numerous applications for off-sale beer and wine permits for future California stores pending with the state's Alcoholic Beverage Control Department. The proposed legislation is likely to shine a spotlight on this. The issue of new stores of any kind selling alcoholic beverages is becoming an issue throughout California, where numerous state and local officials, along with community groups and citizens, feel there already are too many stores selling the adult beverages.

The proposed legislation offers the potential for a spate of further negative publicity for Tesco's Fresh & Easy, along with a major distraction from opening the new stores and increasing sales in the existing ones.

Analysis: Self-checkout-only poses other problems for Fresh & Easy

Fresh & Easy Buzz has identified other problems we believe are posed for Fresh & Easy by having a self-checkout-only system.

For example, Fresh & Easy stores don't accept paper personal checks, nor do they cash company employee payroll checks or U.S and State Government Social Security and Welfare Checks, two things every major supermarket chain and independent, with only minor exceptions, do in California, Nevada and Arizona. The Fresh & Easy grocery stores only except ATM cards and credit cards, in large part do to its self-checkout model and how the system is designed.

Numerous consumers aged 65 and over still prefer to use paper checks rather than debit or credit cards for their grocery shopping. Over the last seven months, Fresh & Easy Buzz has interviewed and talked with numerous senior citizens who've said they didn't go back to a Fresh & Easy grocery store a second time to shop because of the policy of not accepting paper personal checks. Many also have said they just plain don't like the self-service checkout only system as well.

Since people age 55 and over are the fastest growing age group in all three states, it seems like a self-defeating policy for Fresh & Easy not to accept paper personal checks. Why would a retailer which has as its goal to be a food store for "everybody"exclude a significant segment of a fast-growing population?

For example, a simple check-in with officials at Wells Fargo or Bank of America, the two leading banks in the Western USA, will provide data showing just how many consumers over 65 years of age still use paper checks rather than ATM cards at retail stores. It's one reason these major banks haven't eliminated paper checks, although they would like to for cost-cutting reasons.

Additionally, every major supermarket chain (and Wal-Mart), along with nearly all major independent grocers in California, Nevada and Arizona, has as a policy not only to cash employee payroll checks, but to encourage it as well. This is because these retailers know what a lucrative form of business this is. Many consumers, especially lower income ones, often use the supermarket or Wal-Mart as their bank, cashing their bi-weekly payroll check at the store, buying lots of groceries, then using the remainder of the money to pay bills.

This for example is why Wal-Mart has become so aggressive in marketing its payroll check cashing service to consumers. It loves the business it brings. In fact, Wal-Mart recently reduced the rates it charges to cash payroll checks. In the past, Wal-Mart would charge a higher amount to cash the payroll checks (and the Social Security and other government checks) depending on how large of an amount the check was. Earlier this year, Wal-Mart instituted an across the board charge of $4 per-payroll check cashed, regardless of the value of the check.

Safeway Stores, Inc., Kroger Co., and SuperValu, Inc.-owned chains in the three states also cash payroll and government-issued checks. In fact, all three of these chains and Wal-Mart are currently asking shoppers to cash their U.S. government economic stimulus tax rebate checks at their respective stores, and even giving shoppers a 10% bonus if they cash the government-issued checks with them. For example, a $1,200 tax rebate check cashed at stores operated by all four of these companies gets a consumer a bonus of $120, generally in the form of a store gift card.

All four chains have reported a strong consumer response to this check cashing program. However, because of its self-checkout model in part, since Fresh & Easy doesn't cash checks of any kind, it's missing out on all this tax rebate money, which is going to Safeway, Kroger, SuperValue and Wal-Mart-owned stores in California, Nevada and Arizona.

Plastic or plastic

Another problem--and one we see creating a serious environmental negative for Fresh & Easy at any time--is the fact the grocery chain only offers free plastic grocery bags in its stores, and not the option of free paper grocery sacks like every other chain and independent in California, Nevada and Arizona does. At Fresh & Easy it's "plastic or plastic," while everywhere else its "paper or plastic."

Fresh & Easy stores sell what they call "bags for life," which are reusable synthetic bags which cost a consumer 20-cents each. The stores also sell reusable canvas shopping totes. But there's no such thing as a paper grocery sack at a Fresh & Easy store.

The reason for Fresh & Easy stores not offering the paper grocery bag option in large part is because the design of the self-service checkouts in Tesco's Fresh & Easy grocery stores aren't built to accommodate paper grocery bags. Of course, the checkouts could be modified to do so with just a little bit of good old American (and British) ingenuity.

The single-use plastic grocery bag issue is arguably the number one consumer-focused environmental issue facing food and grocery retailers today, especially in California, but throughout the U.S. as well.

For example, the city of San Francisco has banned the use of plastic grocery bags in food, grocery and drug stores of 10,000 square feet or larger. The use of paper grocery bags is fine under the law.

Tesco plans to open at least two of its Fresh & Easy grocery markets--both over 10,000 square feet--in San Francisco early next year. Therefore, it will have to either offer free paper grocery bags only at those stores, or force shoppers to either bring their own bags or buy its reusable "bags for life" or canvas shopping bags, which isn't going to go over with the majority of shoppers, even in uber-green San Francisco.

The nearby city of Oakland also passed a similar law banning the plastic bags. That law has been overturned by a county court because of a lawsuit filed by a plastics industry group. However, the city is rewriting the legislation.

And, ironically, the city of Manhattan Beach in Southern California, where Tesco just opened its latest Fresh & Easy grocery store (number 62) on July 2, has just recently passed a law which will ban food and grocery stores from using single-use free plastic grocery bags, like the ones Fresh & Easy stores use.

The Southern California city of Malibu also recently passed a similar single-use plastic grocery bag ban. Santa Monica is currently proposing a similar ban, as are cities throughout California and other states in the U.S.

Los Angeles County is considering enacting not a bag ban, but rather a per plastic grocery bag fee, in which shoppers would have to pay 15-cents or so for every single-use plastic bag they request in a supermarket. Since Tesco's Fresh & Easy doesn't offer the paper option, that could be rather difficult--and irritating--for shoppers.

Palo Alto in the San Francisco Bay Area also has passed a per-bag fee law, and numerous other California cities and counties are debating between passing outright bans or bag-fee laws.

In other words, any food and grocery retailer in California especially, but also throughout the U.S., currently not offering paper grocery bags as an option, but rather just offering plastic grocery bags, is not only out of the loop in our analysis, but is setting its grocery chain up for a major anti-environmental retailer grass roots and media campaign. In fact, we are surprised one hasn't started already over the plastic bag-only issue at Tesco's Fresh & Easy stores.

A number of U.S. food and grocery retailers are doing the opposite of Fresh & Easy on their own. Whole Foods eliminated the use of single-use plastic grocery bags completely in all of its U.S. stores in April of this year. And Trader Joe's, the grocer most consumers compare Tesco's Fresh & Easy with, uses paper bags as the "default grocery bag" in all of its stores. In other words, unless a shopper specifically asks for a free plastic grocery bag, they get paper.

Fresh & Easy Buzz has been suggesting to Tesco's Fresh & Easy Neighborhood Market that it offer a mix of self-service and full service checkout in its stores rather than trying to force-feed self-service checkout-only on shoppers.

Fresh & Easy stores offer what they call "assisted checkout," in which if a customer goes over to a store clerk and asks for help, the clerk will help the customer check out. However, any of you who've worked in food and grocer retailing in the U.S. for more than an hour, know that when customers have to ask for something like service-checkout, which they normally get on a default basis, they generally don't ask. Rather, they vote with their feet.

All along Tesco's Fresh & Easy has not only said they have absolutely zero problems with the self-checkout-only system, they've even tried to demonstrate through releasing "internal research data" to a British-based supermarket trade publication that it's pioneering what will soon become the norm (full self-checkout) in American food and grocery retailing, which of course is a fantasy.

American shoppers like options. Giving them a mix of self and full-service checkout fits their behavior patterns. It also appeals to "everybody," which is Fresh & Easy's stated target market. Force-feeding them self-service-only drives many of them away, which Trader Joe's and others are just loving, by the way.

Perhaps because of the proposed legislation regarding a ban on alcohol sales at stores that offer only self-service checkout--which we don't believe will pass and become law the way it's currently written--along with the problems we've detailed above involving having a self-service checkout system only, Tesco's Fresh & Easy will re-evaluate its offering.

After all, good marketers usually like to offer consumers choice, even within formats like limited assortment grocery stores that by their very design do have to eliminate some choice. The key is to reduce the choice at the margins--limited product assortments and the like--but not in key areas like service. Offering only self-service checkout doesn't limit the options like a mix of self and full-service would. Rather it eliminates any consumer option in the key area of checkout.

Sometimes proposed new laws like alcohol sales bans, plastic grocery bag bans and fee schemes, not to mention a significant loss of potential business because of not accepting or cashing paper checks, combine to shake up a retailer, which forces it to take a second look at policies and practices it previously thought were perfect. We shall see.

Tesco's Fresh & Easy Neighborhood Market to Start Accepting WIC Vouchers at Central & Adams Store in South Los Angeles This Month

Breaking News - Plus Analysis & Commentary

The Fresh & Easy Neighborhood Market store at 1025 East Adams Boulevard (Central & Adams) in south Los Angeles (pictured above) will start accepting WIC Vouchers (Woman, Infant & Children Program) before the end of July, Fresh & Easy Buzz has learned. The start date could come as early as two weeks from today, according to our sources.

Central & Adams Fresh & Easy store employees are set to begin a training program in how to handle the WIC Vouchers - which are distributed by California WIC (and similar agencies in each U.S. state, including Nevada and Arizona, where the other Fresh & Easy stores are located) to low-income mothers and used to buy specific healthy food and beverage items for their children like infant formula, whole milk, whole grain breads and cereals, and fruits and vegetables - starting either late this week or early next week. Once the store's employees complete the brief training program, the south Los Angeles Fresh & Easy market plans to start accepting the paper vouchers, which look similar to paper checks and are handled by grocers at checkout in essentially the same way as they process paper checks.

We first reported in this April 22, 2010 story - Breaking Buzz: Tesco's Fresh & Easy to Accept WIC Vouchers at its East Adams Store in South Los Angeles - that Fresh & Easy Neighborhood Market had decided to start accepting WIC Vouchers at the Central & Adams store in south Los Angeles. We've been writing about the topic since 2008.

Since early 2008 Fresh & Easy Buzz has suggested Tesco's Fresh & Easy has been missing the grocery retailing boat - both from an ethical food retailing perspective as well as from a simple bottom line sales standpoint - by not accepting WIC Vouchers in its stores. [For example, read what we said in this December 2008 piece: Tesco's Fresh & Easy, 'Food Deserts' and WIC Vouchers; A 'Year-End' Analysis & Commentary] There are currently 159 Fresh & Easy units, located in Southern and Central (Valley) California, southern Nevada and Metropolitan Pheonix, Arizona.

Our argument regarding Tesco's Fresh & Easy and it's missing the food retailing boat by not accepting WIC Vouchers has been a simple one:

>First, there exists an ethical compact in U.S. food & grocery retailing between grocers (and their trade organizations) and the government in which it's considered good practice for grocers to accept WIC Vouchers, which enable low-income mothers to provide nutritious foods for the children, which they otherwise most likely would be unable to afford. Virtually every major grocery chain and most independents in America accept WIC VOuchers in their stores.

We've also have pointed out that since Tesco promotes the fact it has some stores in "food desert" neighborhoods, which are generally low-income, inner city areas where residents are underserved by markets that offer fresh food and groceries at decent prices (like south Los Angeles and Compton, for example) but doesn't accept WIC Vouchers at those stores, it's essentially offering "half a loaf" in that many of the residents of those neighborhoods, like south Los Angeles, are low-income mothers who use WIC Vouchers to buy needed foods for the children, but can't use their vouchers at the neighborhood Fresh & Easy store. [See - February 23, 2010: Food Deserts & WIC Vouchers: Half A Loaf For the New Fresh & Easy Store Opening Tomorrow in South Los Angeles]

>Second, from a pure business (sales) standpoint, we've argued Fresh & Easy is turning away needed sales, particularly at its stores in low-income areas like south Los Angeles and Compton in Southern California, along with a few others, by not accepting WIC Vouchers. Experienced grocers in the Western U.S. (and elsewhere in the country) know just how much added sales volume accepting WIC Vouchers can bring to a store, particularly those units located in low and lower-income neighborhoods.

Tesco either missed the business (sales) argument of accepting WIC Vouchers completely in its extensive research period prior to launching Fresh & Easy Neighborhood Market in November 2007 - not to mention up until now - or decided to disregard the potential added sales reality of accepting WIC all together, despite the fact that Fresh & Easy needs every single dollar of added sales it can muster.

We charitably suggest the retailer likely missed it completely in its research because it created a policy for Fresh & Easy from the start not to accept any form of paper payment in the stores, including paper personal and payroll checks, WIC Vouchers and paper manufacturers' cents off coupons, although it does accept its own paper store coupons, the $6 off (purchases of) $25 or more and $10 off $50 vouchers it regularly distributes to consumers.

Tesco also installed point-of sale (POS) checkout systems in its stores that don't accept paper checks, manufacturers' coupons or WIC Vouchers, suggesting it was oblivious to the benefits of accepting WIC - not to mention manufacturers' cents off coupons and even paper checks, all of which it still doesn't take in the stores - from the very start.

In fact, it's this very point-of-sale system which in-part has held up Fresh & Easy Neighborhood Market from accepting WIC Vouchers at the Central & Adams store to date, although the system has now been adapted to accept the vouchers, according to store employees.

On May 14, 2010, we reported in this story - Fresh & Easy Neighborhood Market Not Yet Accepting WIC Vouchers at South L.A. Store; No Start Date Set - that the Central & Adams Fresh & Easy store hadn't yet started taking WIC Vouchers. Store employees told a Fresh & Easy Buzz correspondent "some kinks" were still being worked out of the POS system.

California WIC had a moratorium on new retailers accepting WIC Vouchers up until January 2010. That moratorium was lifted in January, according to Melinda Beer, an official with the agency.

Fresh & Easy Neighborhood Market is approved to accept WIC, according to Ms. Beer.

[We're told by our sources that the story linked at the end of this paragraph - and the many past stories on the topic linked at the bottom of this piece - provided an impetus to Fresh & Easy's senior management regarding the decision to accept WIC Vouchers at the South Los Angeles store: February 23, 2010: Food Deserts & WIC Vouchers: Half A Loaf For the New Fresh & Easy Store Opening Tomorrow in South Los Angeles.]

In fact, in April, Laurie True, the director of California WIC, told an audience at the United Fresh Produce Association convention in Las Vegas that she was told Fresh & Easy had worked out its problems with the POS systems and was taking (at that time) WIC Vouchers at a store in Compton. She had that store mixed up with the Central & Adams store in south Los Angeles, a simple mistake. However, as we reported in the May piece linked above, that wasn't the case. And of course, it hasn't been the case until now, according to store employees.

However, based on our reporting, that situation should change in the next two -to- three weeks, when Fresh & Easy Neighborhood Market plans to start accepting WIC Vouchers at its store at 1025 East Adams Boulevard in south Los Angeles.

According to our sources, the south Los Angeles store will be the only one of Tesco's current 159 Fresh & Easy stores that will accept the WIC Vouchers for a while. Sort of a test. But if all goes well - and it should since 99% of the grocery stores in California have been accepting WIC Vouchers for as long as the program has existed - its likely Fresh & Easy Neighborhood Market will then start accepting the vouchers in some of its other stores, beginning with those in low-income neighborhoods like in Compton.

Were we Fresh & Easy, we wouldn't wait very long to roll out the acceptance of WIC to all 159 stores. Why wait? It's an accepted method of payment to nearly all grocers in the United States. A number of convenience stores even accept WIC, as do a growing number of farmers markets.

In fact, we suspect once Fresh & Easy sees the nice sales boost it gets at the Central & Adams store on WIC-eligible items (and thus an overall store sales boost) like infant formula, whole milk, juice, eggs, cheese, whole grain breads and cereals, peanut butter, beans and legumes, fresh produce and more, it just might (or at least should) want to accept WIC right away at its other stores.

Additionally, it's important to note that WIC isn't just used by mothers who live in low-income neighborhoods. And in the current economy, people might be surprised at how many mothers in middle-income neighborhoods are relying on WIC to help them feed their children.

With average store market basket sales sizes nowhere near where Tesco wants them to be at present, Fresh & Easy Neighborhood Market would be smart to allow WIC Voucher use at all of its stores as fast as it can.

Further, as we've said in Fresh & Easy Buzz since 2008, not accepting manufacturers' cents off coupons, and to a lessor extent not taking paper personal and payroll checks in the Fresh & Easy stores, are two additional, simple, operational changes the grocer could make that would payoff in the short, medium and long run in terms of added sales - and even more importantly in increasing the customer universe for its stores.

[Readers: Follow the progression of our coverage, via the selected past stories linked below, on the WIC Voucher issue and Tesco's Fresh & Easy Neighborhood Market, from when we first suggested the grocer was missing the boat by not accepting the vouchers, to when we started focusing on why Fresh & Easy should accept them at the south Los Angeles store, which opened in February of this year, to the present.]

September 7, 2008: Analysis & Commentary: Should Tesco's Fresh & Easy Put An Asterisk Next to its Motto? Yes; Unless it Corrects Four Operational Omissions.

December 29, 2008: Tesco's Fresh & Easy, 'Food Deserts' and WIC Vouchers; A 'Year-End' Analysis & Commentary

February 10, 2008: Tesco's Fresh & Easy Opens Latest New Store in 'Food Desert' City of Compton, California

July 2008: Tesco's to Open A Fresh & Easy Grocery Market in Low Income, Underserved South Central Los Angeles Neighborhood

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

July 11, 2008: 'Food Desert' Neighborhoods and Southern California: More on the Fresh & Easy Store Planned For South Central Los Angeles

July 15, 2008: Fresh Food to Bloom in An Inner-City Food Desert: Tesco's Fresh & Easy Breaks Ground For New Store in Underserved South Los Angeles Neighborhood

February 23, 2010: Food Deserts & WIC Vouchers: Half A Loaf For the New Fresh & Easy Store Opening Tomorrow in South Los Angeles

February 24, 2010: Fresh & Easy Store Opens its Doors in South Los Angeles

April 22, 2010: Breaking Buzz: Tesco's Fresh & Easy to Accept WIC Vouchers at its East Adams Store in South Los Angeles

May 14, 2010: Fresh & Easy Neighborhood Market Not Yet Accepting WIC Vouchers at South L.A. Store; No Start Date Set

July 6, 2008: Former NBA Great Earvin 'Magic' Johnson is Working His Business Magic in Urban, Inner City Neighborhoods; We Offer An Idea For Tesco's Fresh & Easy

May 12, 2008: Food Deserts: Coalition to Create 'Blue Ribbon' Commission, Draft Report to Encourage Grocers to Open Stores in Underserved Los Angeles Neighborhoods

February 13, 2008: Leading Democratic Candidate for President Barack Obama Joins Group in Asking Tesco's Fresh & Easy to Put More Stores in Underserved Neighborhoods

June 3, 2008: Fresh & Easy Buzz Redux: Barack Obama to Tesco's Fresh & Easy in Our February 13 Piece: 'Build More Stores in Underserved Neighborhoods'

September 23, 2008: Food Retailing, Society & Economics: 'Food Deserts' and Public Health

March 20, 2009: Federal Government Spending Bill Increases WIC Voucher Program Dollars by $1.2 Billion; 21 Percent Increase

May 28, 2008: Las Vegas Market Report: A 'Food Desert' Neighborhood to Get A New Grocery Store; But it's Not A Fresh & Easy Neighborhood Market

April 27, 2008: New Study Points to Increasing Urban 'Food Deserts' In North America: Locating Stores in 'Food Deserts' A Part of Fresh & Easy's Strategy

March 7, 2008: Former NBA All-Star and Sacramento Native Kevin Johnson is the Driving Force Behind a Fresh & Easy Market in Sacramento's Oak Park Neighborhood

July 29, 2008: Tesco's Fresh & Easy and San Francisco's Tenderloin Redux: Upcoming Developments Offer First Mover Opportunity For Fresh & Easy or Competitors

Gov. Signs AB 183: End of Self-Service Checkout Only in California For Fresh & Easy Neighborhood Market if Stores to Still Sell Alcohol

Self-service checkout at Fresh & Easy Neighborhood Market.

News/Analysis/Commentary

California Governor Jerry Brown signed AB 183 into law on Sunday, as we predicted he would.

The legislation authored by California Assemblywoman Fiona Ma that becomes law January 1, 2012 bans the sale of alcoholic beverages at self-service checkout stands in all format retail stores in California.

We nicknamed AB 183 the "Son of Tesco Fresh & Easy Law" because like the previous two other legislative attempts in 2008 and 2010 (which we nicknamed the "Tesco Fresh & Easy Law") to ban alcohol sales at self-service checkouts in retail stores in the Golden State, AB 183 will have the most immediate and direct affect on Tesco's Fresh & Easy Neighborhood Market because it's the only grocery chain in California that offers self-service checkout only in its stores, rather than the option of full or self-service.

The "Tesco Fresh & Easy Law" is now a reality for United Kingdom-based Tesco, which has 133 of its 182 small-format fresh food and grocery stores in California. The other 49 units are in Arizona (28 stores) and Nevada (21 units).

All but one or two of the 133 Fresh & Easy stores in California offer wine and beer for sale. A number of the stores also offer spirits for sale on the shelves, along with the wine and beer offering.

AB 183 amends California's offsale beer, wine and liquor license code to require retailers that have existing permits and licenses and who apply to offer alcoholic beverages for sale at future store locations, to sell the adult beverages at full-service checkouts, where there is a face-to-face transaction between customers and store employees.

Therefore, as we've said in our extensive coverage of the legislation, based on the current language of AB 183, Tesco's Fresh & Easy Neighborhood Market is going to have to at a minimum operate one full-service checkout stand in its stores in California in order to comply with the new law banning sales of alcohol at self-service checkouts come January 1, 2012.

The other alternative is that Tesco could stop selling alcoholic beverages completely in its stores in California, thereby leaving its self-service checkout system as it is. That, however, is highly unlikely in our analysis and opinion because alcoholic beverage sales, particularly its proprietary brand wines, is an important merchandising element for Fresh & Easy.

We first suggested in early 2008, before any legislation banning alcohol sales at self-service checkouts was ever introduced in the California Legislature, that one of the key operational mistakes Tesco has made with Fresh & Easy Neighborhood Market is to offer self-service checkout only in its stores. Doing so limits consumer choice and limits the potential universe of customers for Tesco's Fresh & Easy stores, thus limiting sales for the chain.

We continue to believe offering self-service checkout only in the Fresh & Easy stores is a very poor management decision.

On Wednesday (October 5, 2011) Tesco reported a 23% reduction in losses for Fresh & Easy for the first six months of its current fiscal year, compared to the same period last fiscal year.

Tesco lost $112 million (on sales of $470.5 million) on Fresh & Easy for the 2011/12 fiscal year, which ended August 27, 2011. That's compared to a loss of $151 million for the previous fiscal half year. Tesco had 177 Fresh & Easy stores opened at the August 27, 2011 half-year end, compared to 159 units for the same period a year ago. There are currently 182 stores.

The 23% reduction in the half-year loss for Fresh & Easy is a significant one for Tesco. But it's still a very long road to Tipperary. Tesco CEO Philip Clarke says the global retailer will break even with Fresh & Easy by the end of its 2012/13 fiscal year, which is about 16 months away.

Clarke has made numerous changes, mostly cosmetic ones though, at Fresh & Easy since becoming CEO of Tesco in March of this year. These include adding in-store bakeries and a few other design and merchandising additions and changes.

But ironically, in our analysis, the one change Clarke hasn't made but that has the potential to dramatically increase business at Fresh & Easy has just been mandated by the Governor of California.

Were we running Tesco and Fresh & Easy, we would move rapidly to offer shoppers the option of self and full-service checkout not only in the 133 Fresh & Easy Neighborhood Market stores in California, but in all 182 stores in California, Nevada and Arizona, which is something we would have done from the start, as we've noted more than once in Fresh & Easy Buzz.

We would offer both full-service and self-service checkout in the stores and, using Fresh & Easy's new loyalty points card which it's rolling out to all the stores next week, give customers who use the self-service checkouts bonus points for doing so, thereby encouraging them to scan and bag their own grocery purchases.

Offering both full and self-service checkout in this way at all the Fresh & Easy stores not only would comply with AB 183 in California where all but 49 of the stores are located, it would also serve to increase the potential universe of shoppers - those many who hate self-serve checkout and don't shop the stores now because of it - for the Fresh & Easy stores. The result: A stronger customer base and added sales.

Additionally, giving customers loyalty points they can redeem for savings on the new digital loyalty cards Fresh & Easy is introducing chainwide this week would encourage the use of the self-service checkouts, which are a labor-saving tool for the grocer.

The addition of the full-service checkout option chainwide will also allow Fresh & Easy Neighborhood Market to accept paper WIC Vouchers in all its stores, something it currently does in only one store, a unit in South Los Angeles, with plans to also do so at the store in San Francisco's Bayview district.

One of the reasons Fresh & Easy hasn't rolled out WIC chainwide is because of the difficulties the chain has had processing the paper vouchers under its self-service checkout only system. With the full-service checkout option in the stores, accepting WIC would be an easy process, as grocery checkers can simply process the vouchers like it's done at other grocery stores.

The potential sales boost for Fresh & Easy if it accepts WIC at all its stores is considerable. For example, according to the California WIC agency, about 7 million mothers receive the vouchers used to purchase healthy foods like infant formula, fresh milk, whole grain cereals, produce and other similar items in California. Therefore, by accepting WIC at its 133 Fresh & Easy stores in California, Tesco would expand its potential customer universe even more. Currently these 7 million potential customers in California are off the table for Tesco's Fresh & Easy.

Another benefit of accepting WIC in all the stores is that most of the items purchased by customers using the vouchers are at full margin.

This fact could potentially help Tesco with its gross and trading margin problems at Fresh & Easy. For example, on Wednesday Tesco reported a negative -24% trading margin for Fresh & Easy for the first half of its fiscal year. That's an improvement of about 10 basis points over the previous period but remains a serious problem for the retailer in its quest to break even by February 2013. It must get that negative margin into positive territory.

The full-service checkout option will also allow Fresh & Easy to accept paper personal checks and to cash customer payroll checks, which it currently doesn't do, in large part because of the same technical difficulties involved in processing the paper WIC Vouchers at the self-service checkouts.

Just like with WIC, grocery checkers could cash payroll checks and process paper personal checks at the full-service checkouts, thereby adding needed shopper choice and expanding the potential universe of customers for the Fresh & Easy stores.

We first pointed out in 2008, as we did with the self-service checkout only system, how not accepting WIC, paper personal checks and payroll checks is a serious operational flaw for Tesco's Fresh & Easy. [For example, see these two stories - September 7, 2008:  Analysis & Commentary: Should Tesco's Fresh & Easy Put An Asterisk Next to its Motto? Yes; Unless it Corrects Four Operational Omissions; and 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.]

From where we sit, closely covering and analyzing Tesco's Fresh & Easy Neighborhood Market for over four years, the passage of AB 183 into law in California is actually an operational blessing in disguise for Tesco if it offers the full-service checkout option, accepts WIC Vouchers in all its stores and invites shoppers to use paper personal checks and cash payroll checks at the checkouts if they so choose to do so as another option in paying for their grocery purchases.

Tesco went with self-service checkout only and the acceptance of plastic debit, EBT (food stamps) and credit cards only for payment at Fresh & Easy Neighborhood Market because it believes the labor savings from not offering a full-service checkout option and processing paper - the WIC Vouchers, personal and payroll checks - trumps the added business Fresh & Easy might get from offering the options.

However, we suggest the last four years of performance by Fresh & Easy since the first stores opened in November 2007 - a loss of about $1 billion - demonstrates the opposite is the case.

Shoppers like options and choice, which is something every experienced grocer knows, particularly in California. By expanding those options and choices like we've suggested in this piece, Tesco will find itself adding customers and sales to its Fresh & Easy stores, which is an option that in our analysis will exceed the labor savings benefits the retailer thinks it's getting currently by limiting customer choice.

Related Stories

September 9, 2011: 'Son of Tesco Fresh & Easy Law': Self-Service Checkout Booze Ban Bill Passes California State Senate; Headed to Governor's Desk For Action

September 7, 2011: Self-Service Checkout Booze Ban Bill Fails in California Senate First Time Around; 'Missing Seven' Dems Hold Key to Passage By Friday

September 6, 2011: California State Senate Set to Vote on Self-Service Checkout Booze Ban Bill This Week

August 20, 2011: 'Son of Tesco Fresh & Easy Law': Self-Service Checkout Booze Ban Bill AB 183 Passes Out of California Senate Appropriations Committee; Headed For Senate Floor

July 27, 2011: 'Son of Tesco Fresh & Easy Law' Moving Through State Senate: Will California Determine Fresh & Easy Neighborhood Market's Checkout Scheme?

June 4, 2011: 'Son of Tesco Fresh Easy Law': Self-Checkout Booze Ban Bill AB 183 Sails Through California State Assembly; State Senate Next Stop

May 11, 2011: ‘Son of Tesco Fresh & Easy Law' - California Assembly Appropriations Committee Passes Self-Checkout Ban Bill AB 183 By 12-4 Margin

May 6, 2011: 'Son of Tesco Fresh & Easy Law': California State Assembly Appropriations Committee Hearing For AB 183 Cancelled

May 4, 2011: 'Son of Tesco Fresh & Easy Law': Strong Chance California Legislation to Prohibit Alcohol Sales at Self-Service Checkouts Could Pass This Year

September 30, 2010: Fresh & Easy Neighborhood Market Hopes Governor Schwarzenegger Can Find His Veto Pen Before Midnight Tonight

September 28, 2010: Fresh & Easy Neighborhood Market Hoping Governor Schwarzenegger Prefers His Veto Pen When it Comes to AB 1060

September 25, 2010: Future of Fresh & Easy Neighborhood Market's Self-Service-Only Checkout in California Up to Governor Schwarzenegger

August 24, 2010: California State Senate Sends Bill to Governor That Could End Self-Service-Only Checkout at Fresh & Easy Neighborhood Market

August 15, 2010 piece : Bill to Ban Alcoholic Beverage Sales at Self-Service Checkouts Would End 'Self-Service Only' at California Fresh & Easy Neighborhood Market Stores

July 14, 2008: Breaking News & Analysis: CA Assemblyman Introduces 'Tesco Fresh & Easy Law' to Ban Stores With Self-Checkout-Only From Selling Alcoholic Beverages.