Breaking News ... Plus Analysis
Tim Ashdown, the former CEO of United Kingdom-based Tesco's Asia operations, who's essentially been running Fresh & Easy Neighborhood Market as its chief operating officer since arriving in May of this year, has been named CEO of the El Segundo, California-headquartered chain, replacing Tim Mason who departed Fresh & Easy and Tesco, where he was deputy CEO and chief marketing officer in addition to being CEO at Fresh & Easy, this week as part of Tesco CEO Philip Clarke's decision to exit the U.S. by either selling the 200-store grocery chain as a whole or in pieces, or if that fails, closing its doors.
Ashdown, who is responsible for the various changes (like testing full-service checkout in two stores) and workforce reduction measures at Fresh & Easy over the last eight months, was named CEO yesterday. The announcement was made to employees at Fresh & Easy's corporate office in El Segundo. Tesco's CEO, Philip Clarke, has been in Southern California this week.
Ashdown's key task as CEO, in our analysis, is to keep Fresh & Easy on life support until Clarke and Tesco's board can, the hope, find a buyer for the chain, which opened the doors of its first store in November 2007. That first store, in Hemet, California, has since been closed, along with 23 other Fresh & Easy units , because it failed to come even close to meeting the weekly sales numbers needed to continue in operation.
Tesco, which truth be known has no idea what to do with Fresh & Easy - and hasn't for a number of years - has hired the Greenhill investment firm to find a buyer for the chain. Failing to do that, Greenhill, which is also the firm trying to find a buyer for Supervalu, Inc., has been charged by Tesco to come up with other alternatives, which include selling the stores and the massive Riverside, California distribution center (and related campus properties) piecemeal.
Greenhill, which actually has been working on the project for some time, is going to have a difficult time of it. For example, only about 20% (30-40 units) of Fresh & Easy's 200-store base are in the black - and not by much. Additionally, many of those money-losing remaining 150-plus stores are bleeding tons of red ink, so much so that Tesco reduced the operating hours of 30-plus stores earlier this year, as we reported exclusively in Fresh & Easy Buzz.
Ask yourself this: Would you buy a grocery chain with only 30-40 of its 200 stores in the black?
Selling the stores piecemeal will be no easy task either. Only a few of the 200 units have sales of $150,000 or more per-week, for example. A few more are doing around $100,000 in average weekly sales. Still others, the bottom tier, aren't even close to approaching weekly sales of $100,000.
The 850,000 square-foot distribution center in Riverside is also a white elephant, which continues to bleed red ink for Tesco. The campus was built for a chain of 1,000 stores doing at least $3 billion a year in annual sales - and with a profit. There are 200 Fresh & Easy stores. Annual sales is a bit over $1 billion.
The facility is also custom-built for the "Fresh & Easy" way of doing business, logistics and distribution. It should eventually sell, but at a very low price, in our analysis.
Tesco of course wants to sell Fresh & Easy as a whole. Good luck.
As we've reported exclusively, discount grocer Aldi (we're still looking for another publication to do some reporting on what is a major development) plans to enter California in 2013. Aldi has an interest in some Fresh & Easy stores and the distribution center, according to our multiple sources. However we would be stunned were they to buy the entire Fresh & Easy operation, unless they get it at a fire sale price, which is possible.
Discounter Dollar General, which is opening numerous dollar stores and Dollar General Market grocery stores throughout California, Nevada and Arizona - the three states where Fresh & Easy does business - also has an interest in the chain. Again we would be stunned if Dollar General were to acquire Fresh & Easy as a whole. Dollar General has been acquiring vacant buildings for its stores in the three states on the cheap. The discounter also has a distribution center in Bakersfield, so doesn't need the Riverside facility.
Bottom line: We predict Tesco will have no choice but to sell Fresh & Easy off piecemeal; groups of stores and single stores, along with marketing the distribution center individually, or perhaps as a package along with a group of stores.
Tesco also has more than a score of Fresh & Easy locations sitting fallow; some with completed but empty stores, others undeveloped locations. It's nightmare; so many leases for so many fallow properties are out there we suspect many landlords are not getting all that much sleep this week.
There is interest out there for some of the Fresh & Easy stores. For example, more than one commercial real estate agent specializing in retail properties has contacted Fresh & Easy Buzz, seeking information about the chain and its stores. Our take from these interactions is that many retailers out there think they can get some stores for a huge bargain.
We've also been asked questions - looking for an informed and objective third party we take it - from representatives a couple retail chains, who are gleaning information about individual Fresh & Easy stores.
We also know of one party that has proposed a joint-venture of sorts with Tesco. In our analysis, it wouldn't fly.
But back at the ranch in El Segundo, Fresh & Easy's new CEO, Tim Ashdown, who's had a trial by fire since arriving in sunny and recently rain-soaked California in May - we reported his being moved from Asia to California exclusively here [ May 2, 2012: Reshuffling at the Top at Tesco: Retail Chief Adams Leaving Fresh & Easy For Turkey; China CEO Ashdown to Replace Him; Richie to Head China Operations] - has plenty more fire to wade through. We suggest a truckload of own brand, perhaps "Tesco's Finest," fire extinguishers might be a good idea.
Ashdown's biggest task, as we've said, is going to be keeping Fresh & Easy on life support between now and about March-April 2013, which is the time CEO Clark and the Tesco board hope to be able to dispose of Fresh & Easy - one way or the other.
Related Stories
December 4, 2012: The End is Here For Fresh & Easy: Mason Out as CEO; Tesco To Figure Out How to Exit U.S.
December 4, 2012: The End For Tesco's Fresh & Easy is Here
August 8, 2012: Fear & Loathing in the Aisles: Reduction in Hours and Selected Firings Begin Today at 33 Fresh & Easy Stores
July 28, 2012: Fresh & Easy Neighborhood Market Planning Major Renovations at Two California Stores
July 28, 2012: Fresh & Easy Neighborhood Market to Test Full-Service Checkout at Two California Stores
July 26, 2012: Fear and Loathing in El Segundo: Mass Firings, Reduction in Store Hours at 33 Fresh & Easy Stores ... and More
June 4, 2012: West Coast Bound - Aldi USA Headed to Southern California; First Stores to Open in 2013
April 10, 2012: Dollar General's California Dream Becoming Reality
Thursday, December 6, 2012
Tuesday, December 4, 2012
The End is Here For Fresh & Easy: Mason Out as CEO; Tesco To Figure Out How to Exit U.S.
Tesco has just announced in this statement it will conduct a "strategic review" of its 199-store Fresh & Easy Neighborhood Market chain, which is one of three options we reported yesterday the United Kingdom-headquartered global retailer would announce this morning. It's 7 am in the United Kingdom.
As part of the review, Tesco also announced that Tim Mason, who's been the CEO of Fresh & Easy since its start over five years ago, is leaving the company.
Mason, who's been with Tesco for over 30-years and is married to the daughter of a former Tesco CEO and Chairman, was given the added title of deputy CEO of Tesco in March 2011, following the retirement of Sir Terry Leahy, the former Tesco CEO who hatched the idea for Fresh & Easy. Philip Clarke replaced Leahy as CEO.
Mason, who lives in Southern California and has made millions of dollars in salary and bonuses while CEO of Fresh & Easy, was also given the position and title of chief marketing officer for Tesco last March, which was the position he held at the global retailer before departing for America in 2006 to head up its now failed fresh food and grocery retailing venture as CEO.
Here's what Tesco and its CEO Philip Clarke said (italics) about the "strategic review" in a very brief press statement just released:
In October, we announced that new capital investment in Fresh & Easy was to be tightly constrained whilst the business focused on reducing costs and improving the profitability of its existing stores.
It is now clear that Fresh & Easy will not deliver acceptable shareholder returns on an appropriate timeframe in its current form.We have therefore appointed Greenhill to assist with the review of options. In recentmonths, we have had a number of approaches from parties interested in acquiring either all or part of Fresh & Easy, or in partnering with us to develop the Fresh & Easy business. We will communicate progress on this process when we present our full year results for the current financial year in April 2013.We are also announcing that Tim Mason is to leave Tesco after 30 years' service with the company.“I have been clear since my appointment as CEO was announced that my role is to deliver long-term value for shareholders. Following a year in which my priority for Fresh & Easy was to improve its performance, I have now made a fully-informed assessment of its longer term potential.“Whilst the business has many positives, its journey to scale and acceptable returns will take too long relative to other opportunities. I have therefore decided to conduct a strategic review of Fresh & Easy, with all options under consideration. “Tim Mason, who leaves Tesco today, has played an important part in our success over a 30 year career with the company, and he leaves with my thanks and good wishes.”
Tesco also just posted a piece in its 'Talking Shop' blog from Philip Clarke, which you can read here.
Clarke makes it very clear in both the corporate news release and in his blog post that Tesco will exit the U.S. with Fresh & Easy one way or the other - be it the sale of the chain as a whole (very unlikely to happen), selling it off in pieces, or closing the operation and moving on - as we've been reporting all year would be the case, and as we correctly reported in this piece yesterday: "The End For Tesco's Fresh & Easy is Here."
Like we reported on Tuesday, the end is hear for Tesco's Fresh & Easy, regardless of when it occurs or how the disposition comes down.
As part of the review, Tesco also announced that Tim Mason, who's been the CEO of Fresh & Easy since its start over five years ago, is leaving the company.
Mason, who's been with Tesco for over 30-years and is married to the daughter of a former Tesco CEO and Chairman, was given the added title of deputy CEO of Tesco in March 2011, following the retirement of Sir Terry Leahy, the former Tesco CEO who hatched the idea for Fresh & Easy. Philip Clarke replaced Leahy as CEO.
Mason, who lives in Southern California and has made millions of dollars in salary and bonuses while CEO of Fresh & Easy, was also given the position and title of chief marketing officer for Tesco last March, which was the position he held at the global retailer before departing for America in 2006 to head up its now failed fresh food and grocery retailing venture as CEO.
Here's what Tesco and its CEO Philip Clarke said (italics) about the "strategic review" in a very brief press statement just released:
In October, we announced that new capital investment in Fresh & Easy was to be tightly constrained whilst the business focused on reducing costs and improving the profitability of its existing stores.
It is now clear that Fresh & Easy will not deliver acceptable shareholder returns on an appropriate timeframe in its current form.We have therefore appointed Greenhill to assist with the review of options. In recentmonths, we have had a number of approaches from parties interested in acquiring either all or part of Fresh & Easy, or in partnering with us to develop the Fresh & Easy business. We will communicate progress on this process when we present our full year results for the current financial year in April 2013.We are also announcing that Tim Mason is to leave Tesco after 30 years' service with the company.“I have been clear since my appointment as CEO was announced that my role is to deliver long-term value for shareholders. Following a year in which my priority for Fresh & Easy was to improve its performance, I have now made a fully-informed assessment of its longer term potential.“Whilst the business has many positives, its journey to scale and acceptable returns will take too long relative to other opportunities. I have therefore decided to conduct a strategic review of Fresh & Easy, with all options under consideration. “Tim Mason, who leaves Tesco today, has played an important part in our success over a 30 year career with the company, and he leaves with my thanks and good wishes.”
Tesco also just posted a piece in its 'Talking Shop' blog from Philip Clarke, which you can read here.
Clarke makes it very clear in both the corporate news release and in his blog post that Tesco will exit the U.S. with Fresh & Easy one way or the other - be it the sale of the chain as a whole (very unlikely to happen), selling it off in pieces, or closing the operation and moving on - as we've been reporting all year would be the case, and as we correctly reported in this piece yesterday: "The End For Tesco's Fresh & Easy is Here."
Like we reported on Tuesday, the end is hear for Tesco's Fresh & Easy, regardless of when it occurs or how the disposition comes down.
The End For Tesco's Fresh & Easy is Here
We've been reporting exclusively all year that the end of Tesco's Fresh & Easy Neighborhood Market - 199 stores in California, Nevada and Arizona - is near.
Now, according to our sources, the near is here: Tomorrow Tesco could announce that it's either selling or will pull the plug and close its five-year-old U.S. fresh food and grocery chain, which has racked up loses of nearly $2 billion.
If Tesco doesn't announce either of these two moves tomorrow when it reports its holiday season trading numbers to date - and based on our reporting we haven't been able to confirm there is a buyer for Fresh & Easy - it will announce it's launching a "formal review" of Fresh & Easy Neighborhood Market, which is merely a way to buy some time in order to further search for a buyer.
As we've reported previously, Tesco has been formally reviewing Fresh & Easy since earlier this year when Tesco CEO Philip Clarke brought in former Asia operations CEO Jeff Ashdown to essentially take over day-to-day operations of the Southern California-based grocery chain.
Tesco's CEO and its board know the status of the chain (if not Tesco investors are in real trouble) - another $100 million dollar-plus loss for the current fiscal year which ends February 2013 is on the way, for example - which is why an announcement of a "formal review" would merely be a stall tactic.
Tesco reported a $250 million loss for Fresh & Easy for its most recently-ended fiscal year. We expect the loss for this fiscal year, which ends February 2013, to be slightly but not much less than that because of the massive layoffs, some cost-cutting, and the halt on new store openings at Fresh & Easy since August of this year.
Further evidence that the end is here: There are numerous Fresh & Easy stores completed and previously slated to have been opened in the third and fourth quarters of this year, like the units in Los Angeles and Sunnyvale, California which a construction firm contracted to Fresh & Easy handed over to the chain a couple months ago, that haven't been opened. The two locations are at the top of what is a list (planned new store roll out) of stores Fresh & Easy has wanted to open but hasn't been allowed to by parent Tesco.
Nobody needs a formal review to know that when a grocer doesn't open stores it's spent millions of dollars to have built, its CEO, in this case Tesco CEO Philip Clarke, doesn't see a future for the operation. Translation: The end of Fresh & Easy is here regardless of what Tesco says tomorrow morning about its U.S. operation.
As we've reported exclusively, Tesco has been trying to sell Fresh & Easy for some time. Among the potentials we've reported on are Aldi and Dollar General.
Additionally, we've also reported there's been "feelers" out to various commercial retail real estate agents for some time, the goal of which has been to "dispose" of Fresh & Easy, either as a whole chain or in bits and pieces. Tesco has also, as we've reported, been trying without success to either sell or sublease a number of the numerous store locations it has but has never opened.
At present we can't conclusively report a sale of Fresh & Easy, or that if a deal to sell the chain hasn't been inked that Tesco will pull the plug and close its Southern California-based food and grocery retailing operation.
But we can report the end of Fresh & Easy is here. And it's here regardless of when or the form in which Tesco disposes of it.
Stay tuned though, as we continue to work the story.
Note: Read through the tweets from all of 2012 at www.twitter.com/freshneasybuzz (as well as the blog) for a natural progression of our reportage about the end of Tesco's Fresh & Easy being "near" to its end being "here."
Breaking...More to come...
#
Now, according to our sources, the near is here: Tomorrow Tesco could announce that it's either selling or will pull the plug and close its five-year-old U.S. fresh food and grocery chain, which has racked up loses of nearly $2 billion.
If Tesco doesn't announce either of these two moves tomorrow when it reports its holiday season trading numbers to date - and based on our reporting we haven't been able to confirm there is a buyer for Fresh & Easy - it will announce it's launching a "formal review" of Fresh & Easy Neighborhood Market, which is merely a way to buy some time in order to further search for a buyer.
As we've reported previously, Tesco has been formally reviewing Fresh & Easy since earlier this year when Tesco CEO Philip Clarke brought in former Asia operations CEO Jeff Ashdown to essentially take over day-to-day operations of the Southern California-based grocery chain.
Tesco's CEO and its board know the status of the chain (if not Tesco investors are in real trouble) - another $100 million dollar-plus loss for the current fiscal year which ends February 2013 is on the way, for example - which is why an announcement of a "formal review" would merely be a stall tactic.
Tesco reported a $250 million loss for Fresh & Easy for its most recently-ended fiscal year. We expect the loss for this fiscal year, which ends February 2013, to be slightly but not much less than that because of the massive layoffs, some cost-cutting, and the halt on new store openings at Fresh & Easy since August of this year.
Further evidence that the end is here: There are numerous Fresh & Easy stores completed and previously slated to have been opened in the third and fourth quarters of this year, like the units in Los Angeles and Sunnyvale, California which a construction firm contracted to Fresh & Easy handed over to the chain a couple months ago, that haven't been opened. The two locations are at the top of what is a list (planned new store roll out) of stores Fresh & Easy has wanted to open but hasn't been allowed to by parent Tesco.
Nobody needs a formal review to know that when a grocer doesn't open stores it's spent millions of dollars to have built, its CEO, in this case Tesco CEO Philip Clarke, doesn't see a future for the operation. Translation: The end of Fresh & Easy is here regardless of what Tesco says tomorrow morning about its U.S. operation.
As we've reported exclusively, Tesco has been trying to sell Fresh & Easy for some time. Among the potentials we've reported on are Aldi and Dollar General.
Additionally, we've also reported there's been "feelers" out to various commercial retail real estate agents for some time, the goal of which has been to "dispose" of Fresh & Easy, either as a whole chain or in bits and pieces. Tesco has also, as we've reported, been trying without success to either sell or sublease a number of the numerous store locations it has but has never opened.
At present we can't conclusively report a sale of Fresh & Easy, or that if a deal to sell the chain hasn't been inked that Tesco will pull the plug and close its Southern California-based food and grocery retailing operation.
But we can report the end of Fresh & Easy is here. And it's here regardless of when or the form in which Tesco disposes of it.
Stay tuned though, as we continue to work the story.
Note: Read through the tweets from all of 2012 at www.twitter.com/freshneasybuzz (as well as the blog) for a natural progression of our reportage about the end of Tesco's Fresh & Easy being "near" to its end being "here."
Breaking...More to come...
#
Wednesday, August 8, 2012
Fear & Loathing in the Aisles: Reduction in Hours and Selected Firings Begin Today at 33 Fresh & Easy Stores
The Insider - Heard on the Street
Tesco's Fresh & Easy Neighborhood Market began terminating selected store-level employees, mostly but not exclusively regular grocery clerks called Customer Assistants, today at 33 of its 199 grocery markets in California, Nevada and Arizona.
I learned this while visiting a number of Fresh & Easy stores in two states yesterday and today.
I also verified it with a number of store-level Fresh & Easy Neighborhood Market employees, including two who were fired today.
In this July 26, 2012 piece, Fear and Loathing in El Segundo: Mass Firings, Reduction in Store Hours at 33 Fresh & Easy Stores ... and More, I reported exclusively that Fresh & Easy Neighborhood Market planned to reduce the operating hours at 33 of its stores from the retailer's normal 8 a.m.-10 p.m. hours to 9 a.m-8 pm, beginning soon.
That day is here: I also learned during my store visits yesterday and today that the reduced hours at the 33 stores are effective today. Instead of the previous 8 a.m.-10 p.m. operating hours, the doors to these 33 Fresh & Easy markets now officially open at 9 a.m, and close at 8 a.m.
I'm not aware of one grocery chain (read competitor to Tesco's Fresh & Easy) in California, Nevada and Arizona. In fact, many stores operated by the leading chains in the three states, such as Safeway, Kroger Co., Supervalu, Save Mart, Albertson's LLC, Stater Bros. and others, keep many of their respective stores open 24-hours. The stores not open 24-hours close generally at 11 p.m or midnight and open at 7 a.m.
Grocery stores that are doing well don't close at 8 p.m., unless they're doing so well that opening them any later would prove to be an embarrassment of riches to a modest grocery retailer. And grocers who want their stores to do well don't close them at 8 p.m.
Additionally, for those not experienced in the food and grocery retailing business, if a grocer decides to close a bunch of stores, like 33 of its 199 units, at 8 p.m. rather than the previous 10 p.m., you can take it to the bank the company CEO has very little if any faith in the future potential of those stores. If that's not the case, then he just doesn't understand the grocery business.
The selected store-level layoffs are a part of the reduction in hours program at the 33 Fresh & Easy stores.
Since the stores are opening one hour later and closing two hours earlier, less employees are needed.
Some of the workers at the affected stores are getting transfers to other Fresh & Easy markets.
Other employees at the 33 stores are getting their hours cut, in many cases down to 20 hours a week, which is the minimum they are required to work in order for the grocery chain to pay the 70-75% employer contribution for the workers health insurance policies.
Over the last five years of its operation (the first stores opened in November 2007) most Fresh & Easy Customer Assistants, who are hired part time and guaranteed 20 hours a week at the time of hire, have worked more than the minimum guaranteed hours at the request of either store management or themselves. Few employees have worked just 20 hours a week over the last five years Fresh &Easy has been in operation.
Cost-cutting strategy
The reduction in store operating hours and related reduction in store employee hours, along with the layoffs of the Customer Assistants and others I'm telling readers about today, is all about reducing labor and related costs for Tesco's Fresh & Easy.
The store-level cuts go hand-in-hand with the termination of about 50 employees in one day at Fresh & Easy Neighborhood Market's corporate headquarters in El Segundo, California, which I wrote about here on July 26.
Battles and wars
The cost-cutting comes now, in my analysis and opinion, because Tesco's fiscal half-year ends in about a month. Tesco must show its making at least a minimum reduction in its losses, $245 million for the most-recently-ended fiscal year (ended February 2012), when it reports its fiscal half-year results this fall.
Prior to making the cuts at its corporate headquarters in late July and the store-reductions I'm describing in this piece, Fresh & Easy Neighborhood Market was not on track to show any significant improvement in its half-year performance over the previous half-year, based on my reporting and analysis.
Since the cuts come so near the end of the half-year, I don't expect Tesco to report a major reduction in losses for the half-year in relation to the $245 million it lost in its most-recently ended fiscal year. It will be interesting to see - and more cuts are coming - what Tesco does report as a loss for Fresh & Easy for the half-year.
Breaking even with Fresh & Easy, which Tesco says it will do so by the end of its 2014 fiscal year, which is less than two years away, is only part of the story for Tesco - it's the battle but not the war. And it's the war that truly matters. Despite winning many battles a war can still be lost.
For Tesco, continuing my battle vs. war analogy, the war boils down to this question: Does Fresh & Easy have a future as a viable and profitable grocery chain?
That's a question I will be addressing in one of my next columns.
-The Insider
[Editor's Note: 'The Insider' isn't a literal or descriptiive title for our columnist. Fresh & Easy Buzz is an independent Blog, and is not affiliated with Tesco, Tesco's Fresh & Easy Neighborhood Market, or any of its competitors. No member of the Fresh & Easy Buzz editorial team has ever or currently works for Tesco or its Fresh & Easy Neighborhood Market chain.]
Tesco's Fresh & Easy Neighborhood Market began terminating selected store-level employees, mostly but not exclusively regular grocery clerks called Customer Assistants, today at 33 of its 199 grocery markets in California, Nevada and Arizona.
I learned this while visiting a number of Fresh & Easy stores in two states yesterday and today.
I also verified it with a number of store-level Fresh & Easy Neighborhood Market employees, including two who were fired today.
In this July 26, 2012 piece, Fear and Loathing in El Segundo: Mass Firings, Reduction in Store Hours at 33 Fresh & Easy Stores ... and More, I reported exclusively that Fresh & Easy Neighborhood Market planned to reduce the operating hours at 33 of its stores from the retailer's normal 8 a.m.-10 p.m. hours to 9 a.m-8 pm, beginning soon.
That day is here: I also learned during my store visits yesterday and today that the reduced hours at the 33 stores are effective today. Instead of the previous 8 a.m.-10 p.m. operating hours, the doors to these 33 Fresh & Easy markets now officially open at 9 a.m, and close at 8 a.m.
I'm not aware of one grocery chain (read competitor to Tesco's Fresh & Easy) in California, Nevada and Arizona. In fact, many stores operated by the leading chains in the three states, such as Safeway, Kroger Co., Supervalu, Save Mart, Albertson's LLC, Stater Bros. and others, keep many of their respective stores open 24-hours. The stores not open 24-hours close generally at 11 p.m or midnight and open at 7 a.m.
Grocery stores that are doing well don't close at 8 p.m., unless they're doing so well that opening them any later would prove to be an embarrassment of riches to a modest grocery retailer. And grocers who want their stores to do well don't close them at 8 p.m.
Additionally, for those not experienced in the food and grocery retailing business, if a grocer decides to close a bunch of stores, like 33 of its 199 units, at 8 p.m. rather than the previous 10 p.m., you can take it to the bank the company CEO has very little if any faith in the future potential of those stores. If that's not the case, then he just doesn't understand the grocery business.
The selected store-level layoffs are a part of the reduction in hours program at the 33 Fresh & Easy stores.
Since the stores are opening one hour later and closing two hours earlier, less employees are needed.
Some of the workers at the affected stores are getting transfers to other Fresh & Easy markets.
Other employees at the 33 stores are getting their hours cut, in many cases down to 20 hours a week, which is the minimum they are required to work in order for the grocery chain to pay the 70-75% employer contribution for the workers health insurance policies.
Over the last five years of its operation (the first stores opened in November 2007) most Fresh & Easy Customer Assistants, who are hired part time and guaranteed 20 hours a week at the time of hire, have worked more than the minimum guaranteed hours at the request of either store management or themselves. Few employees have worked just 20 hours a week over the last five years Fresh &Easy has been in operation.
Cost-cutting strategy
The reduction in store operating hours and related reduction in store employee hours, along with the layoffs of the Customer Assistants and others I'm telling readers about today, is all about reducing labor and related costs for Tesco's Fresh & Easy.
The store-level cuts go hand-in-hand with the termination of about 50 employees in one day at Fresh & Easy Neighborhood Market's corporate headquarters in El Segundo, California, which I wrote about here on July 26.
Battles and wars
The cost-cutting comes now, in my analysis and opinion, because Tesco's fiscal half-year ends in about a month. Tesco must show its making at least a minimum reduction in its losses, $245 million for the most-recently-ended fiscal year (ended February 2012), when it reports its fiscal half-year results this fall.
Prior to making the cuts at its corporate headquarters in late July and the store-reductions I'm describing in this piece, Fresh & Easy Neighborhood Market was not on track to show any significant improvement in its half-year performance over the previous half-year, based on my reporting and analysis.
Since the cuts come so near the end of the half-year, I don't expect Tesco to report a major reduction in losses for the half-year in relation to the $245 million it lost in its most-recently ended fiscal year. It will be interesting to see - and more cuts are coming - what Tesco does report as a loss for Fresh & Easy for the half-year.
Breaking even with Fresh & Easy, which Tesco says it will do so by the end of its 2014 fiscal year, which is less than two years away, is only part of the story for Tesco - it's the battle but not the war. And it's the war that truly matters. Despite winning many battles a war can still be lost.
For Tesco, continuing my battle vs. war analogy, the war boils down to this question: Does Fresh & Easy have a future as a viable and profitable grocery chain?
That's a question I will be addressing in one of my next columns.
-The Insider
[Editor's Note: 'The Insider' isn't a literal or descriptiive title for our columnist. Fresh & Easy Buzz is an independent Blog, and is not affiliated with Tesco, Tesco's Fresh & Easy Neighborhood Market, or any of its competitors. No member of the Fresh & Easy Buzz editorial team has ever or currently works for Tesco or its Fresh & Easy Neighborhood Market chain.]
Wednesday, August 1, 2012
Fresh & Easy Developing Smaller Version of its 3K Square-Foot 'Fresh & Easy Express' Format Stores
Breaking Buzz & Analysis
Tesco-owned Fresh & Easy Neighborhood Market is currently developing a 2,000 square-foot version of its 3,000 square-foot 'Fresh & Easy Express' convenience-oriented food and grocery market, according to multiple sources familiar with the project.
Fresh & Easy is constructing a prototype of the 2,000 square-foot store inside a space it controls near the 10,000 square-foot Fresh & Easy Neighborhood Market unit in Los Angeles' Eagle Rock Neighborhood.
El Segundo, California-based Fresh & Easy Neighborhood Market used that very same space to build a mock-up of its 3,000 square-foot 'Express' format stores, of which their are currently about 10 units, all in Southern California.
The new 2,000 square-foot market, called an F2 in Fresh & Easy speak - the 10,000 square-foot stores for example are referred to internally at Fresh & Easy as F10's, the 3,000 square-foot stores F3's, and the handful of 7,000 square-foot markets the grocer operates are F7's - is basically a scaled-down version of the 3,000 square-foot stores, according to sources who are familiar with the project.
For example, current plans call for smaller refrigerated, frozen food and produce cases than in the 3,000 square-foot stores as a way to compensate for the reduced square footage, according to our sources. Some types of cases and shelving also could be eliminated for the same reason, our sources say.
Neither Tesco or its Fresh & Easy Neighborhood Market chain have announced the development of the 2,000 square-foot stores. This is the first time Tesco's plans for a smaller version of the 3,000 square-foot 'Fresh & Easy Express' store is being reported.
Analysis
The first question any food and grocery retailing analyst or grocer worth his or her salt should ask upon reading this report is: 'Why a 2,000 square-foot version of what already at 3,000 square feet is a very small-format grocery market.?
The answer to that question, according to our sources (and to our reporting and analysis of Tesco and its Fresh & Easy chain for five years on) - and it's what we said was the primary driving force behind the 3,000 square-foot 'Express' format in our stories about the stores last year - is that Tesco's Fresh & Easy is searching for ways to reduce its new store development and opening capital cost while still growing its store count.
Since launching its California-based small-format fresh food and grocery chain in 2007, Tesco has always said it will break even financially with Fresh & Easy - which lost about $245 million in its most recent fiscal year and has lost about $1.5 billion over its five year history - by achieving scale, which means opening numerous stores over a short period of time.
For example, from 2006 to 2010 Tesco said it still planned to have at least 500 stores in four-to-five years, on its way to 1,000 stores over an about six or seven year period, which would be 2013-end-to-2014. It said this despite the fact it's paused opening new stores for many months at least three times in Fresh & Easy's five year history. The most recent period being at present.
But in 2011, not long after he took over as CEO of Tesco in March of last year, Philip Clarke said the United Kingdom-based retailer planned to open just 400 Fresh & Easy stores, which would allow Tesco to break even with its U.S. grocery chain by the end of its 2013 fiscal year, which ends February 2013.
Not many months later Clarke and Tesco changed those plans, saying instead of the 400 Fresh & Easy units needed to break even by the end of fiscal 2013, it had figured out a way to do so with just 300 stores.
But then earlier this year Clarke and Tesco pushed back Fresh & Easy's break-even time to the end of its 2014 fiscal year, at which time the retailer says it will then break even with Fresh & Easy Neighborhood Market. Tesco kept - so far - the 300 store number as the number of Fresh & Easy units needed to break even by the end of the 2014 fiscal year.
There are 199 Fresh & Easy stores in California, Nevada and Arizona.
Tesco's 2014 fiscal year-end is about two years away. That means it will have to build and open 101 stores between now and then to reach 300 units, which Clarke and company say is needed to break even at that time.
But Tesco has essentially stopped opening Fresh & Easy stores, with the exception of one or two here or there.
Instead, the retailer has embarked on a cost-cutting campaign of limited sorts with Fresh & Easy, which begs another key question any industry analyst or grocer should ask: "How can Tesco open 101 stores in two years - which is half as many as it's opened over the last five years - when beginning a couple months ago it essentially stopped opening new Fresh & Easy stores?
In fact, even if Tesco were opening Fresh & Easy stores at its high-point-pace, it would be near physically and logistically impossible, and not very smart, to open 101 stores in two years, particularly considering the continued poor performance of the California-based grocery chain and its need to reduce costs and raise margin at it to even come close to breaking even with Fresh & Easy
The answer to the question, as it pertains to the micro small-format store prototype being developed, isn't that Tesco is going to open 101 2,000 square-foot grocery markets - the format in development. For example, it's opened just 10 or so of the 3,000 square-foot Fresh & Easy Express stores in the year or so since the first unit was opened.
There are numerous reasons why they won't do so but here's a simple reason why if they do it won't help: The best 10,000 square-foot Fresh & Easy stores do about $150,000 in average weekly sales, and there aren't many of those units. That would mean the best of the 2,000 square-foot stores would do - at best - about 40,000 in weekly sales. If scale, as in growing sales by growing store-count, matters, 101 2,000 square-foot stores, even if they all were stellar performers, which they won't be, doesn't add up to a whole lot of annual sales when one looks at the big picture.
But hopes and dreams of reduced capital costs without considering the fundamental question - can 2,000 square-foot grocery stores operated the way Fresh & Easy operates them make any money - it appears spring eternal at Fresh & Easy Neighborhood Market.
Therefore, the Tesco-owned chain is developing a smaller version of its 3,000 square-foot 'Express' store, shaving 1,000 square feet off the store size.
Perhaps Tesco hopes it can "shrink" (in terms of store size) rather than grow (recall those days of a 1,000-store chain) its way to break-even with Fresh & Easy.
But size does matter. And a 2,000 square-foot grocery market, like all small formats - including 3,000 and 10,000 square-foot grocery stores - are fraught with problems when it comes to making money. Just ask Walmart - the now folded 'marketside by Walmart' stores and its fledgling small-format Walmart Express, which despite being 15,000 square-feet is having economic struggles endemic to many small-format grocery stores, particularly those run by chains without a history of operating such stores.
Or ask Safeway CEO Steve Burd, who put an end to the California-based supermarket chain's 'The Market' format (10,000-14,000 square-foot grocery markets ) after just two test units has been opened and operated for about one-year each. Both stores, in Long Beach and San Jose, California, remain open but Burd killed further development of the format over two years ago.
According to our sources, at present there isn't a set date for when - or if - the first 2,000 square-foot Fresh & Easy store will open. However, our sources say, Fresh & Easy already has a number of locations for the stores scouted out, although much of the grocer's real estate team was fired last Wednesday, which is an important indication of the future of Fresh & Easy Neighborhood Market's new store development plans.
Those plans: Little to nothing going forward for the rest of this year in terms of acquiring new store sites - there are already dozens of Fresh & Easy sites that have been sitting fallow for as long as four-to-five years - and opening new Fresh & Easy stores.
[Editor's Note: Fresh & Easy Buzz is an independent Blog, and is not affiliated with Tesco, Tesco's Fresh & Easy Neighborhood Market, or any of its competitors. No member of the Fresh & Easy Buzz editorial team has ever or currently works for Tesco or its Fresh & Easy Neighborhood Market chain.]
Tesco-owned Fresh & Easy Neighborhood Market is currently developing a 2,000 square-foot version of its 3,000 square-foot 'Fresh & Easy Express' convenience-oriented food and grocery market, according to multiple sources familiar with the project.
Fresh & Easy is constructing a prototype of the 2,000 square-foot store inside a space it controls near the 10,000 square-foot Fresh & Easy Neighborhood Market unit in Los Angeles' Eagle Rock Neighborhood.
El Segundo, California-based Fresh & Easy Neighborhood Market used that very same space to build a mock-up of its 3,000 square-foot 'Express' format stores, of which their are currently about 10 units, all in Southern California.
The new 2,000 square-foot market, called an F2 in Fresh & Easy speak - the 10,000 square-foot stores for example are referred to internally at Fresh & Easy as F10's, the 3,000 square-foot stores F3's, and the handful of 7,000 square-foot markets the grocer operates are F7's - is basically a scaled-down version of the 3,000 square-foot stores, according to sources who are familiar with the project.
For example, current plans call for smaller refrigerated, frozen food and produce cases than in the 3,000 square-foot stores as a way to compensate for the reduced square footage, according to our sources. Some types of cases and shelving also could be eliminated for the same reason, our sources say.
Neither Tesco or its Fresh & Easy Neighborhood Market chain have announced the development of the 2,000 square-foot stores. This is the first time Tesco's plans for a smaller version of the 3,000 square-foot 'Fresh & Easy Express' store is being reported.
Analysis
The first question any food and grocery retailing analyst or grocer worth his or her salt should ask upon reading this report is: 'Why a 2,000 square-foot version of what already at 3,000 square feet is a very small-format grocery market.?
The answer to that question, according to our sources (and to our reporting and analysis of Tesco and its Fresh & Easy chain for five years on) - and it's what we said was the primary driving force behind the 3,000 square-foot 'Express' format in our stories about the stores last year - is that Tesco's Fresh & Easy is searching for ways to reduce its new store development and opening capital cost while still growing its store count.
Since launching its California-based small-format fresh food and grocery chain in 2007, Tesco has always said it will break even financially with Fresh & Easy - which lost about $245 million in its most recent fiscal year and has lost about $1.5 billion over its five year history - by achieving scale, which means opening numerous stores over a short period of time.
For example, from 2006 to 2010 Tesco said it still planned to have at least 500 stores in four-to-five years, on its way to 1,000 stores over an about six or seven year period, which would be 2013-end-to-2014. It said this despite the fact it's paused opening new stores for many months at least three times in Fresh & Easy's five year history. The most recent period being at present.
But in 2011, not long after he took over as CEO of Tesco in March of last year, Philip Clarke said the United Kingdom-based retailer planned to open just 400 Fresh & Easy stores, which would allow Tesco to break even with its U.S. grocery chain by the end of its 2013 fiscal year, which ends February 2013.
Not many months later Clarke and Tesco changed those plans, saying instead of the 400 Fresh & Easy units needed to break even by the end of fiscal 2013, it had figured out a way to do so with just 300 stores.
But then earlier this year Clarke and Tesco pushed back Fresh & Easy's break-even time to the end of its 2014 fiscal year, at which time the retailer says it will then break even with Fresh & Easy Neighborhood Market. Tesco kept - so far - the 300 store number as the number of Fresh & Easy units needed to break even by the end of the 2014 fiscal year.
There are 199 Fresh & Easy stores in California, Nevada and Arizona.
Tesco's 2014 fiscal year-end is about two years away. That means it will have to build and open 101 stores between now and then to reach 300 units, which Clarke and company say is needed to break even at that time.
But Tesco has essentially stopped opening Fresh & Easy stores, with the exception of one or two here or there.
Instead, the retailer has embarked on a cost-cutting campaign of limited sorts with Fresh & Easy, which begs another key question any industry analyst or grocer should ask: "How can Tesco open 101 stores in two years - which is half as many as it's opened over the last five years - when beginning a couple months ago it essentially stopped opening new Fresh & Easy stores?
In fact, even if Tesco were opening Fresh & Easy stores at its high-point-pace, it would be near physically and logistically impossible, and not very smart, to open 101 stores in two years, particularly considering the continued poor performance of the California-based grocery chain and its need to reduce costs and raise margin at it to even come close to breaking even with Fresh & Easy
The answer to the question, as it pertains to the micro small-format store prototype being developed, isn't that Tesco is going to open 101 2,000 square-foot grocery markets - the format in development. For example, it's opened just 10 or so of the 3,000 square-foot Fresh & Easy Express stores in the year or so since the first unit was opened.
There are numerous reasons why they won't do so but here's a simple reason why if they do it won't help: The best 10,000 square-foot Fresh & Easy stores do about $150,000 in average weekly sales, and there aren't many of those units. That would mean the best of the 2,000 square-foot stores would do - at best - about 40,000 in weekly sales. If scale, as in growing sales by growing store-count, matters, 101 2,000 square-foot stores, even if they all were stellar performers, which they won't be, doesn't add up to a whole lot of annual sales when one looks at the big picture.
But hopes and dreams of reduced capital costs without considering the fundamental question - can 2,000 square-foot grocery stores operated the way Fresh & Easy operates them make any money - it appears spring eternal at Fresh & Easy Neighborhood Market.
Therefore, the Tesco-owned chain is developing a smaller version of its 3,000 square-foot 'Express' store, shaving 1,000 square feet off the store size.
Perhaps Tesco hopes it can "shrink" (in terms of store size) rather than grow (recall those days of a 1,000-store chain) its way to break-even with Fresh & Easy.
But size does matter. And a 2,000 square-foot grocery market, like all small formats - including 3,000 and 10,000 square-foot grocery stores - are fraught with problems when it comes to making money. Just ask Walmart - the now folded 'marketside by Walmart' stores and its fledgling small-format Walmart Express, which despite being 15,000 square-feet is having economic struggles endemic to many small-format grocery stores, particularly those run by chains without a history of operating such stores.
Or ask Safeway CEO Steve Burd, who put an end to the California-based supermarket chain's 'The Market' format (10,000-14,000 square-foot grocery markets ) after just two test units has been opened and operated for about one-year each. Both stores, in Long Beach and San Jose, California, remain open but Burd killed further development of the format over two years ago.
According to our sources, at present there isn't a set date for when - or if - the first 2,000 square-foot Fresh & Easy store will open. However, our sources say, Fresh & Easy already has a number of locations for the stores scouted out, although much of the grocer's real estate team was fired last Wednesday, which is an important indication of the future of Fresh & Easy Neighborhood Market's new store development plans.
Those plans: Little to nothing going forward for the rest of this year in terms of acquiring new store sites - there are already dozens of Fresh & Easy sites that have been sitting fallow for as long as four-to-five years - and opening new Fresh & Easy stores.
[Editor's Note: Fresh & Easy Buzz is an independent Blog, and is not affiliated with Tesco, Tesco's Fresh & Easy Neighborhood Market, or any of its competitors. No member of the Fresh & Easy Buzz editorial team has ever or currently works for Tesco or its Fresh & Easy Neighborhood Market chain.]
Saturday, July 28, 2012
Fresh & Easy Neighborhood Market Planning Major Renovations at Two California Stores
Companion Story: Fresh & Easy Neighborhood Market Plans to Test Full-Service Checkout at Two Stores in California
Breaking Buzz & Analysis
Tesco's Fresh & Easy Neighborhood Market is planning to make major renovations at two of its stores in California, Fresh & Easy Buzz has learned.
The two stores are at Main Street and Raymond Avenue in the Southern California city of Alhambra, and at Lincoln and Sterling in Lincoln, California, which is near Sacramento in Northern California.
The key element of the renovation and retrofit project will be the addition of full-service checkout lanes in both stores, as we reported in this related story.
Fresh & Easy will keep the self-service checkouts currently in the stores, but plans to add the full-service checkout lanes as an option for customers, which is something we've been saying for five years the Tesco-owned grocery chain needs to do in all its stores.
In addition to adding the full-service checkouts, Fresh & Easy plans a major renovation and realignment of the produce departments in the two grocery stores, adding new display fixtures, which will be wood, along with reusing some of the existing fixtures as part of the produce redo.
Renovation plans also call for adding a coffee bar in the front of both stores.
There will be a few other changes made in the stores as part of the project. But the addition of the full-service checkstands, the complete produce department redo, and the new coffee bar are the key elements of the planned project.
The renovation project might pose some problems for Fresh & Easy Neighborhood Market though, according to one of our sources who's very familiar with the project and the plans, because one of the 50 corporate headquarters employees fired last Wednesday was James Smith, who as a director headed up Fresh & Easy's construction efforts.
Smith, who worked for Fresh & Easy for nearly six years until being dismissed Wednesday (he was among the first employees at the chain in 2007), is the only person who to date has managed retrofits like those planned at the stores in Alhambra and Lincoln for Fresh & Easy Neighborhood Market, according to our sources.
Our sources say Fresh & Easy still plans to go forward with the project, however, despite no longer having Smith on board.
A source familiar with the project and plans says it's going to be very difficult to pull the project off in the August time-frame, not only because of Smith's departure, but also because the only architect who's ever done such a major retrofit for Fresh & Easy, Rick Redpath, is no longer employed at the firm, Nadel Architects, heading up the project for the grocer.
We've also learned from another source that Fresh & Easy is using a new general contractor for this project instead of LPS, the contractor it's used in the past for similar retrofits.
"Basically, it's an entirely new team, good luck with that," says one of our sources, commenting on the difficulties that can arise when a completely new construction team handles retrofits like the ones planned for the Fresh & Easy markets in Alhambra and Lincoln.
On the other hand, "often new teams, out to prove their worth, can get the job done," another of our sources familiar with the renovation project says. He adds though that "with all that's going on at Fresh & Easy," where he worked for about five years but isn't one of the employees let go on Wednesday," it's hard to understand why they are doing these renovations now." It's basically too late, in my opinion," he says.
For us here at Fresh & Easy Buzz, the key element of the retrofits is the addition of the full-service checkout lanes in the two California stores, as we detailed in our companion story here.
If Fresh & Easy keeps to its plans, the renovations are set to begin in just a bit over two weeks, August 16, and set to be completed by the end of August. We'll be watching closely.
[Editor's Note: Fresh & Easy Buzz is an independent Blog, and is not affiliated with Tesco, Tesco's Fresh & Easy Neighborhood Market, or any of its competitors. No member of the Fresh & Easy Buzz editorial team has ever or currently works for Tesco or its Fresh & Easy Neighborhood Market chain.]
Breaking Buzz & Analysis
Tesco's Fresh & Easy Neighborhood Market is planning to make major renovations at two of its stores in California, Fresh & Easy Buzz has learned.
The two stores are at Main Street and Raymond Avenue in the Southern California city of Alhambra, and at Lincoln and Sterling in Lincoln, California, which is near Sacramento in Northern California.
The key element of the renovation and retrofit project will be the addition of full-service checkout lanes in both stores, as we reported in this related story.
Fresh & Easy will keep the self-service checkouts currently in the stores, but plans to add the full-service checkout lanes as an option for customers, which is something we've been saying for five years the Tesco-owned grocery chain needs to do in all its stores.
In addition to adding the full-service checkouts, Fresh & Easy plans a major renovation and realignment of the produce departments in the two grocery stores, adding new display fixtures, which will be wood, along with reusing some of the existing fixtures as part of the produce redo.
Renovation plans also call for adding a coffee bar in the front of both stores.
There will be a few other changes made in the stores as part of the project. But the addition of the full-service checkstands, the complete produce department redo, and the new coffee bar are the key elements of the planned project.
The renovation project might pose some problems for Fresh & Easy Neighborhood Market though, according to one of our sources who's very familiar with the project and the plans, because one of the 50 corporate headquarters employees fired last Wednesday was James Smith, who as a director headed up Fresh & Easy's construction efforts.
Smith, who worked for Fresh & Easy for nearly six years until being dismissed Wednesday (he was among the first employees at the chain in 2007), is the only person who to date has managed retrofits like those planned at the stores in Alhambra and Lincoln for Fresh & Easy Neighborhood Market, according to our sources.
Our sources say Fresh & Easy still plans to go forward with the project, however, despite no longer having Smith on board.
A source familiar with the project and plans says it's going to be very difficult to pull the project off in the August time-frame, not only because of Smith's departure, but also because the only architect who's ever done such a major retrofit for Fresh & Easy, Rick Redpath, is no longer employed at the firm, Nadel Architects, heading up the project for the grocer.
We've also learned from another source that Fresh & Easy is using a new general contractor for this project instead of LPS, the contractor it's used in the past for similar retrofits.
"Basically, it's an entirely new team, good luck with that," says one of our sources, commenting on the difficulties that can arise when a completely new construction team handles retrofits like the ones planned for the Fresh & Easy markets in Alhambra and Lincoln.
On the other hand, "often new teams, out to prove their worth, can get the job done," another of our sources familiar with the renovation project says. He adds though that "with all that's going on at Fresh & Easy," where he worked for about five years but isn't one of the employees let go on Wednesday," it's hard to understand why they are doing these renovations now." It's basically too late, in my opinion," he says.
For us here at Fresh & Easy Buzz, the key element of the retrofits is the addition of the full-service checkout lanes in the two California stores, as we detailed in our companion story here.
If Fresh & Easy keeps to its plans, the renovations are set to begin in just a bit over two weeks, August 16, and set to be completed by the end of August. We'll be watching closely.
[Editor's Note: Fresh & Easy Buzz is an independent Blog, and is not affiliated with Tesco, Tesco's Fresh & Easy Neighborhood Market, or any of its competitors. No member of the Fresh & Easy Buzz editorial team has ever or currently works for Tesco or its Fresh & Easy Neighborhood Market chain.]
Fresh & Easy Neighborhood Market to Test Full-Service Checkout at Two California Stores
Companion Story: Fresh & Easy Neighborhood Market Planning Major Renovations at Two California Stores
Breaking Buzz & Analysis
Tesco's Fresh & Easy Neighborhood Market plans to begin testing full-service checkout lanes in two California stores beginning, if all goes as planned, by the end of August, Fresh & Easy Buzz has learned.
The full-service checkout tests will be at the Fresh & Easy store at Main Street and Raymond Avenue in the Southern California city of Alhambra, and at the Lincoln and Sterling unit in Lincoln, which is near Sacramento in Northern California, according to information we have from multiple sources in positions to know about the plans.
The two test stores will continue to offer self-service checkout. The full-service checkout lanes will be offered in the test as an option to customers.
The full-service checkouts are part of a retrofit project Fresh & Easy is doing at the two stores. See our companion story here.
According to our sources, Fresh & Easy's senior management hasn't yet put a time period on the test in terms of if and when they will decide to roll the full-service option out to additional units. There are currently 199 Fresh & Easy grocery markets in California, Nevada and Arizona.
The decision to test full-service checkout at the two Fresh & Easy markets - an interesting one because since 2007 when the first stores opened the grocery chain's CEO, Tim Mason, along with its corporate spokesperson, have said publicly Tesco and Fresh & Easy Neighborhood Market are fully committed to the self-service checkout system, essentially saying it's a winner - was quarterbacked by new retail operations chief Tim Ashdown.
We broke the news about Ashdown's coming on board at Fresh & Easy in this May 2, 2012 story. Before joing Fresh & Easy Neighborhood Market a couple months ago he was CEO of Tesco's operations in China.
Since joining Fresh & Easy, Ashdown has been been a busy guy. For example, he was responsible for deciding to fire 50 employees at Fresh & Easy's corporate headquarters on Wednesday of this week, as one way of many to attempt to reduce the losses at the Tesco-owned grocery chain. [See the piece by our 'The Insider' columnist here.]
According to our sources, CEO Tim Mason approved Ashdown's decision. Mason and Ashdown then left it up to the various Fresh & Easy line managers to decide which specific people to let go, although the line managers were given guidelines, the chief one being that a certain financial target needed to be reached, which meant many of the employees fired were at director level; the highest paid staffers after top-level management.
For nearly five years we've been saying in Fresh & Easy Buzz that one of Tesco's major fumbles from day one with its Fresh & Easy Neighborhood Market chain is that it offers only self-service checkout in its fresh food and grocery markets in California, Nevada and Arizona.
In fact, we've done far more than say so -- we've offered historical analysis on why offering self-service checkout only is folly, along with offering proactive suggestions on why Fresh & Easy is missing the boat by not offering both full and self-service checkout.
We've also offered a variety of examples in various stories about why not offering both full and self-service checkout is a major point of competitive disadvantage for Tesco's Fresh & Easy.
A few of those examples include the inability to accept paper checks and WIC vouchers at the stores, along with the plain and simple fact that, based on nearly 40 years' experience in the U.S. food and grocery industry, which has included doing studies on shopper preferences for full or self-service checkout (including in California), the empirical evidence simply is that by offering self-service checkout only, Fresh & Easy limits its potential universe of customers because the majority of grocery shoppers in the U.S. just don't want to scan and bag their own groceries, particularly when they can go to numerous stores that offer groceries at the same prices, and even for less, than Fresh & Easy does, full-service checkout and bagging included at no extra charge.
In our analysis, testing full-service checkout at only two Fresh & Easy stores makes very little sense because it offers little in the way of a representative sample, although it is less expensive then testing it in five or six stores, which would not only make better sense - two urban stores, two suburban stores and one rural store, for example - but would provide a much better picture in considering whether or not to roll it out chainwide.
Of course from our perspective - and since we've said from day one that offering self-service checkout only is a huge mistake for Tesco - it's a moot point because we would have both self and full-service checkout in all stores without question or hesitation.
The move, in our analysis, really comes too late for Fresh & Easy. The chain basically has a year to show dramatic improvement in terms of reducing its losses. If not, the notion of breaking even by February 2014, which Tesco CEO Philip Clarke says will happen, not only won't be achievable but will essentially be a moot point. The operative point being: Can Fresh & Easy be anything more that a chain that finally stops losing money for Tesco?
In order to grow Fresh & Easy, even if it were to break even by February 2014 (if it's still around), Tesco has to have confidence in investing money in that growth - and it needs the confidence of its investors to continue doing so, considering about $2 billion has already been invested, and around $1.5 billion has been lost in five years. That confidence doesn't currently exist, even, we suggest, when it comes to CEO Philip Clarke, his (infrequent these days when it comes to Fresh & Easy) public prognostications to the contrary.
Meanwhile, five years after launching Fresh & Easy, and five years after we first pointed out why Tesco made a major mistake offering only self-service checkout in its Fresh & Easy stores, the retailer will test full-service checkout at the two stores in California.
No announcement has been made of this test by Tesco or Fresh & Easy. It will be interesting to see how they position it, now that it's being reported on.
California recently passed a law banning the sale of alcoholic beverages at self-service checkouts in the state's grocery and other format stores that offer adult beverages for sale. That law is currently in court, being challenged by the California Grocer's Association, largely because of Fresh & Easy, which is a member, since none of the trade groups other grocer-members offer self-service checkout only in their stores. As such, this could be one way Fresh & Easy explains the need for the full-service checkout test at the two stores.
Tesco isn't in any position to tinker around the edges with two-store self-service checkout tests at Fresh & Easy though. If it believes in Fresh & Easy, it should add the full-service checkout options to all the stores post haste.
And that's the central question and proposition: 'Does Tesco believe in Fresh & Easy?' It's a theme we will be returning to in the coming days in our reporting, analysis and commentary.
[Editor's Note: Fresh & Easy Buzz is an independent Blog, and is not affiliated with Tesco, Tesco's Fresh & Easy Neighborhood Market, or any of its competitors. No member of the Fresh & Easy Buzz editorial team has ever or currently works for Tesco or its Fresh & Easy Neighborhood Market chain.]
Breaking Buzz & Analysis
Tesco's Fresh & Easy Neighborhood Market plans to begin testing full-service checkout lanes in two California stores beginning, if all goes as planned, by the end of August, Fresh & Easy Buzz has learned.
The full-service checkout tests will be at the Fresh & Easy store at Main Street and Raymond Avenue in the Southern California city of Alhambra, and at the Lincoln and Sterling unit in Lincoln, which is near Sacramento in Northern California, according to information we have from multiple sources in positions to know about the plans.
The two test stores will continue to offer self-service checkout. The full-service checkout lanes will be offered in the test as an option to customers.
The full-service checkouts are part of a retrofit project Fresh & Easy is doing at the two stores. See our companion story here.
According to our sources, Fresh & Easy's senior management hasn't yet put a time period on the test in terms of if and when they will decide to roll the full-service option out to additional units. There are currently 199 Fresh & Easy grocery markets in California, Nevada and Arizona.
The decision to test full-service checkout at the two Fresh & Easy markets - an interesting one because since 2007 when the first stores opened the grocery chain's CEO, Tim Mason, along with its corporate spokesperson, have said publicly Tesco and Fresh & Easy Neighborhood Market are fully committed to the self-service checkout system, essentially saying it's a winner - was quarterbacked by new retail operations chief Tim Ashdown.
We broke the news about Ashdown's coming on board at Fresh & Easy in this May 2, 2012 story. Before joing Fresh & Easy Neighborhood Market a couple months ago he was CEO of Tesco's operations in China.
Since joining Fresh & Easy, Ashdown has been been a busy guy. For example, he was responsible for deciding to fire 50 employees at Fresh & Easy's corporate headquarters on Wednesday of this week, as one way of many to attempt to reduce the losses at the Tesco-owned grocery chain. [See the piece by our 'The Insider' columnist here.]
According to our sources, CEO Tim Mason approved Ashdown's decision. Mason and Ashdown then left it up to the various Fresh & Easy line managers to decide which specific people to let go, although the line managers were given guidelines, the chief one being that a certain financial target needed to be reached, which meant many of the employees fired were at director level; the highest paid staffers after top-level management.
For nearly five years we've been saying in Fresh & Easy Buzz that one of Tesco's major fumbles from day one with its Fresh & Easy Neighborhood Market chain is that it offers only self-service checkout in its fresh food and grocery markets in California, Nevada and Arizona.
In fact, we've done far more than say so -- we've offered historical analysis on why offering self-service checkout only is folly, along with offering proactive suggestions on why Fresh & Easy is missing the boat by not offering both full and self-service checkout.
We've also offered a variety of examples in various stories about why not offering both full and self-service checkout is a major point of competitive disadvantage for Tesco's Fresh & Easy.
A few of those examples include the inability to accept paper checks and WIC vouchers at the stores, along with the plain and simple fact that, based on nearly 40 years' experience in the U.S. food and grocery industry, which has included doing studies on shopper preferences for full or self-service checkout (including in California), the empirical evidence simply is that by offering self-service checkout only, Fresh & Easy limits its potential universe of customers because the majority of grocery shoppers in the U.S. just don't want to scan and bag their own groceries, particularly when they can go to numerous stores that offer groceries at the same prices, and even for less, than Fresh & Easy does, full-service checkout and bagging included at no extra charge.
In our analysis, testing full-service checkout at only two Fresh & Easy stores makes very little sense because it offers little in the way of a representative sample, although it is less expensive then testing it in five or six stores, which would not only make better sense - two urban stores, two suburban stores and one rural store, for example - but would provide a much better picture in considering whether or not to roll it out chainwide.
Of course from our perspective - and since we've said from day one that offering self-service checkout only is a huge mistake for Tesco - it's a moot point because we would have both self and full-service checkout in all stores without question or hesitation.
The move, in our analysis, really comes too late for Fresh & Easy. The chain basically has a year to show dramatic improvement in terms of reducing its losses. If not, the notion of breaking even by February 2014, which Tesco CEO Philip Clarke says will happen, not only won't be achievable but will essentially be a moot point. The operative point being: Can Fresh & Easy be anything more that a chain that finally stops losing money for Tesco?
In order to grow Fresh & Easy, even if it were to break even by February 2014 (if it's still around), Tesco has to have confidence in investing money in that growth - and it needs the confidence of its investors to continue doing so, considering about $2 billion has already been invested, and around $1.5 billion has been lost in five years. That confidence doesn't currently exist, even, we suggest, when it comes to CEO Philip Clarke, his (infrequent these days when it comes to Fresh & Easy) public prognostications to the contrary.
Meanwhile, five years after launching Fresh & Easy, and five years after we first pointed out why Tesco made a major mistake offering only self-service checkout in its Fresh & Easy stores, the retailer will test full-service checkout at the two stores in California.
No announcement has been made of this test by Tesco or Fresh & Easy. It will be interesting to see how they position it, now that it's being reported on.
California recently passed a law banning the sale of alcoholic beverages at self-service checkouts in the state's grocery and other format stores that offer adult beverages for sale. That law is currently in court, being challenged by the California Grocer's Association, largely because of Fresh & Easy, which is a member, since none of the trade groups other grocer-members offer self-service checkout only in their stores. As such, this could be one way Fresh & Easy explains the need for the full-service checkout test at the two stores.
Tesco isn't in any position to tinker around the edges with two-store self-service checkout tests at Fresh & Easy though. If it believes in Fresh & Easy, it should add the full-service checkout options to all the stores post haste.
And that's the central question and proposition: 'Does Tesco believe in Fresh & Easy?' It's a theme we will be returning to in the coming days in our reporting, analysis and commentary.
[Editor's Note: Fresh & Easy Buzz is an independent Blog, and is not affiliated with Tesco, Tesco's Fresh & Easy Neighborhood Market, or any of its competitors. No member of the Fresh & Easy Buzz editorial team has ever or currently works for Tesco or its Fresh & Easy Neighborhood Market chain.]
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