Monday, May 19, 2008

Fresh & Easy Buzz's May 13 Piece On Execution Research Ltd.'s Consumer Interview-Based 'Study' Of Tesco's Fresh & Easy Has Inquiring Minds Inquiring

On Tuesday, May 13, Fresh & Easy Buzz published this piece, "'America's New Cult Retailer': Three Big Questions For Execution Research Ltd. About its Interview Study of Tesco's Fresh & Easy Store Customers," following a story published the day before, Monday, May 12, in the Financial Times newspaper.

That story, "Shoppers 'positive' on Tesco's U.S. stores," reported a survey conducted by a London, UK investment banking, stock brokerage and research firm called Execution Research Ltd. of 700 Fresh & Easy store customers outside nine of the retailer's grocery markets in Southern California, Arizona and Nevada, resulted in data and conclusions saying there is widespread and strong consumer support for Tesco's small-format, convenience-oriented Fresh & Easy grocery stores in the market regions where the stores operate.

The firm also claims the results of the study lead it to conclude the majority of the 700 Fresh & Easy customers interviewed said Fresh & Easy offers fresher foods than Whole Foods Market and Trader Joe's, and better value for their money than Wal-Mart.

The Financial Times' piece even went as far as to quote an unnamed person at Executive Research Ltd. as saying based on the study "Fresh & Easy is America's new cult retailer."

[Read the Tuesday, May 17 Fresh & Easy Buzz piece, "'America's New Cult Retailer': Three Big Questions For Execution Research Ltd," here.]

[Read the Monday, May 12, Financial Times' story, "Shoppers 'positive' on Tesco's U.S. stores," here.]

The skeptical inquirer

Fresh & Easy Buzz was the first publication of any kind to raise an issue and ask questions about the research in our May 13 piece.

We did so, and wrote the piece, because the Financial Times' story raised numerous red flags to our somewhat consumer and marketing research experienced eyes.

Among those red flags is the simple fact the Financial Times' story contains zero data about the Executive Research Ltd. study. No mention of the study methodology, how the consumer interviews were conducted, how the data was analyzed, or even if the researchers included all the information from the respondents, regardless if it was positive or negative vis-a-vis Tesco's Fresh & Easy stores.

Additionally, as we point out in the May 13 piece, not one number, percentage or data point is included in the Financial Times' story. For example, did 98% of the 700 respondents say such glowing things about the stores, leading Executive Research to proclaim Fresh & Easy "America's New Cult Retailer," or was it 75%, or 51%? Not a clue from the FT piece. Inquiring minds enjoy knowing such minor details like percentages.

Inquiring minds are inquiring

Our Tuesday, May 13 piece has set off the "red flag detectors" of a few other food and grocery industry analysts regarding the Financial Times' report, and more importantly the Executive Research Ltd. "study" itself.

The first inquiry of note came on Thursday, May 15, when George Anderson, the editor-in-chief of the U.S-based retail industry website and discussion board posed this question (see below) of the day in the daily industry discussion section of the website:

5/15/08 Tesco's Fresh & Easy Reassessed
George Anderson

Many were expecting great things before Tesco opened the first of its Fresh & Easy Neighborhood Markets. Some even spoke about how the format could potentially revolutionize food retailing in the U.S.

As is often the case, the opening of the first stores brought out the critics. A number of analysts wrote reports suggesting that Tesco's entry into the American market was performing well below expectations and that the chain was trying to figure out a fix.

When Tesco announced in March that it was taking a three-month timeout on opening new stores, many were quick to use that as evidence that Fresh & Easy was struggling.

Many openly dismissed assertions by Simon Uwins, the chain's marketing director, in a company blog that Fresh & Easy was taking a short pause to "kick the tyres, smooth out any wrinkles, and make some improvements that customers have asked for."

In the past week, a new light has been shed on Fresh & Easy's performance. A report in the Financial Times made public key findings of consumer surveys conducted by Executive Research in the U.S. The firm, according to the paper, has no relationship with Tesco.

According to the report, "Fresh & Easy is the new cult retailer. At the risk of doing the job of Tesco's public relations department, F&E is already an incredible success story."

Executive Research conducted interviews with 700 customers outside of Fresh & Easy stores in Las Vegas, Los Angeles and Phoenix. Nearly nine in 10 of those interviewed said they would "highly recommend" Fresh & Easy to family and friends. Researchers placed traffic at the stores at between 20 and 30 people an hour.

What isn't known yet is how that traffic and customer goodwill translates into dollars spent in Fresh & Easy stores. According to the Financial Times' report, Tesco has maintained that its sales were above the industry average of $8.70 a square foot. The chain is said to need to hit between $14 and $21 to meet the goals set for individual stores.

Executive Research said stores it sampled were generally doing between $6 and $12 a square foot but that some of the better performing locations were up around $20. "We estimate that within five years F&E will make sales of $12 billion," wrote Executive Research.

Discussion Questions: How do you rate Fresh & Easy's prospects? What is your reaction to this new research?

The very first response to Anderson's think piece question came from veteran food and grocery retailing industry trade journalist, editor, consumer researcher, author and consultant Ryan Mathews, who is a contributor.

For decades Mathews has been one of the brighter lights among grocery industry writers and analysts, as well as having a rather well-tuned BS detector when it comes to research consumption.

Below is what Mathews wrote in response to Mr. Anderson's question to the panel about the Executive Research Ltd. research report from the Financial Times:

Is it me or should we wait for independent confirmation of this research? There's something a tad suspicious about a U.K. based firm being the first to detect progress at F&E.

Tesco is a great company and its ability to course-correct is legendary but too often "research" gives you back a reflection of the researcher's bias rather than the truth. We don't know what questions were asked or how they were phrased. If we did, it might make these findings easier to evaluate. Ryan Mathews, Founder, CEO, Black Monk Consulting.

Mathews correct "wait and see until we can review the data" approach echoes Fresh & Easy Buzz's May 13 piece.

[You can read what other panelists wrote about the Executive Research Ltd. Fresh & Easy study report in the Financial Times, along with their analysis and views on Tesco's Fresh & Easy here.]

Today, another food and grocery industry analyst has picked up the ball we kicked into the arena with our Tuesday, May 13 piece.

Jim Prevor, who publishes an industry blog called the Perishable Pundit today has a "Special Report" analyzing the Executive Research Ltd. study of what it has termed "America's New Cult Retailer," Tesco's Fresh & Easy Neighborhood Market.

Mira Slott, the special projects editor for the online food and grocery industry publication, talked to two of the researchers based at Executive Research Ltd.'s London office about the study.

Ms. Slott essentially asked the two staff members the "Big Three" questions Fresh & Easy Buzz posed to Executive Research Ltd. in our Tuesday, May 13 piece, along with many other questions of her own which she fired at them in what we think was a very well-conducted interview.

Among those "Big Three"questions she asked: (1) Will you publish your study for all to read? If not, how about at least an executive summary of the study? (2) Did Executive Research Ltd. pay for the study or was it funded by a client? [One of the staff members said the firm paid for the "study" itself, but was a bit vague on the details.] (3) Will you describe your research methodology? In other words, how did you arrive at the conclusions about Fresh & Easy having fresher foods than Whole Foods and Trader Joe's, offering better value than Wal-Mart, and that Tesco's Fresh & Easy is "America's New Cult Retailer?"

Guess what?

The responses Ms. Slott obtained to these answers amounted to essentially NO on all counts, except one of the researchers did say the firm funded the study itself.

However, he also mentioned the firm gets paid by clients. We see a bit of a muddle in his answer to that question. Technically, if a client doesn't write a check with "For the Tesco Fresh & Easy Research Project" on the notation line, we suppose that means said client didn't fund such a study. This is all hypothetical of course. But, hypothetically, clients can "fund" research in ways other than issuing a check for it with the notation mentioned above, can't they? Hypothetically of course.

[You can read Ms. Slott's full interview with the two Executive Research Ltd. staff members here. There also are additional analysis pieces about the study by the Perishable Pundit at that link.]

Hopping off the turnip truck

Are we surprised Executive Research Ltd. won't publish the study or even an executive summary of it? No.

Are we surprised Executive Research Ltd., which is an investment bank/stock brokerage not a stand-alone research house as we mentioned in our May 13 piece, was vague on the statement it paid for the research itself, while also mentioning in the same sentence it does research for clients? No.

Are we surprised Executive Research Ltd. won't discuss or publish the methodology of the interview survey, not provide any real data, numbers or percentages? No.

Red flags at full-mast

The red flags regarding this study are flying at full-mast. They're flapping fully in the wind like a great-winged Golden Eagle with the wind at its back.

We know of no research firm or investment bank that would conduct a study, release its "results" and conclusions to only one publication, the Financial Times, but not make the data and "results" and conclusions of said study available to other publications, especially when the results of such a study are so favorable to a company, like those Executive Research Ltd. has drawn from its research on Tesco's Fresh & Easy U.S. grocery stores.

This "study" folks is a moot point unless the firm publishes it--the actual interview questions, the methodology, interview procedures, the analysis and results--online for all to read and analyze.

In fact, at this point in the game it would even be difficult to take such a published study seriously because of the closed-door and elusive nature of the researchers in terms of how they've handled the research to date, and how the study was actually conducted and its conclusions arrived at.

We think Tesco agrees with that analysis. Why?

To the retailer's credit, it's been a week after Executive Research Ltd. had the piece published about the conclusions, without any data included, in the Financial Times, and Tesco's Fresh & Easy hasn't attempted to garner any publicity from the firm's proclamations that not only is Fresh & Easy "America's New Cult Retailer," but that the majority of the 700 customers interviewed outside the stores said Fresh & Easy offers fresher foods than Whole Foods Market and Trader Joe's, and offers lower prices and better value than Wal-Mart.

One of the Executive Research Ltd. staffers interviewed by the Perishable Pundit's Ms. Slott told her Tesco knew about the study beforehand. Assuming it's true, it's even more interesting that Fresh & Easy Neighborhood Market's marketing and PR team hasn't issued a press release about the glowing results and conclusions, nor attempted to seek publicity about them.

Perhaps they too see a red flag or five regarding the research?

Hat's off to the Fresh & Easy team for not making the mistake thus far of jumping on what from the start looked like a bandwagon missing its wheels in the form of the Executive Research Ltd. customer-based study of Tesco's Fresh & Easy grocery stores.

There's a reason serious researchers disclose the methodology, how they conducted the research, and the quantitative analysis and results of any survey or interview study. That reason is because they want their work taken seriously.

We don't take Executive Research Ltd.'s study, in which they conclude Tesco's Fresh & Easy grocery stores have fresher foods than Whole Foods and Trader Joe's, and offer more value than Wal-Mart, seriously. Fresh & Easy just might have all those things; but not based on the methodology-less and data-less Executive Research Ltd. study's conclusions.

In fact...How do we really know an actual study was conducted? [We emailed the lead reporter of the Financial Times' story on Tuesday, May 13, asking if she saw and reviewed an actual hard copy or online version of the complete study, and if she had it in electronic form would she consider emailing a copy to us to review. Unfortunately, we haven't received a response to date.]

Of course, should the research firm publish the complete study online, including its methodology, interview procedures, detailed analysis and quantitative rational for the conclusions backed with real numbers and data, we're willing to take a second--well actually a first since the only report about its conclusion to date is the Financial Times story, along with the other publications which reported on what the FT reported on--look. But, we will do so with all those red flags flying at full-mast in a skeptical form of inquiry.

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