Financial Times Follows Fresh & Easy Buzz's Lead in Reporting on Wal-Mart's Plans to Open Marketside Stores in Southern California

Fresh & Easy Buzz was the first publication to report months ago that Wal-Mart is planning to open some of its new small-format Marketside combination grocery and fresh foods markets in Southern California (and Northern California), along with its first four markets set to open in the Phoenix, Arizona market this fall.

We also are the only publication to date (on June 6, 2008) to report Wal-Mart is considering locating a small-format Marketside store in a major new mixed-use development in Reno, in northern Nevada.

We first reported Wal-Mart planned to locate Marketside stores in Southern and Northern California as early as December, 2007. Since then we've filled out that story with numerous pieces about the development.

For example, in this May 18, 2008 story, "Wal-Mart Looking For Sites in California For it's Small-Format 'Marketside' Grocery Stores," we reported on the progress Wal-Mart is making in terms of searching for Marketside store locations in Southern and Northern California.

Fresh & Easy Buzz also was the first to report that among the regions and cities Wal-Mart is targeting in Southern California for its Marketside stores includes San Diego County, including downtown San Diego itself.

Today's edition of the Financial Times newspaper is confirming Fresh & Easy Buzz's enterprise reporting that Wal-Mart indeed has plans to open some of its small-format Marketside grocery stores in Southern California. Specifically, the publication is confirming Wal-Mart plans to open two Marketside stores in the San Diego region, one in downtown San Diego as we reported and the other in the nearby city of Oceanside.

The downtown San Diego location (in the new residential condominium project) is the one we previously reported on in what is often referred to as the city's Gaslamp downtown district.

You can read the Financial Times' report, "Wal-Mart takes on Tesco's US chain," which confirms Fresh & Easy Buzz's reporting of months ago, here.

More Marketside units to come in California

As we've reported previously, the San Diego region is far from the only part of Southern California , and California as a whole, where Wal-Mart plans to open Marketside stores.

In addition, as we've also reported based on information from our sources, Wal-Mart also has plans to open its small-format Marketside grocery stores--which will offer a basic selection of grocery products, fresh foods, and in-store prepared ready-to-eat and ready-to-heat meals and side dishes--in Northern California, with a specific focus on the San Francisco Bay Area.

Wal-Mart has had a difficult time being able to gain approval for its combination food, grocery and general merchandise Supercenters in the Bay Area because of city government and consumer group opposition to the mega-stores which average about 180,000 square feet. Therefore, the retailer hopes in-part to be able to increase its market share in the food and grocery categories in the lucrative Bay Area market by locating the smaller and different style Marketside stores, which don't use Wal-Mart at all as a part of the banner, in the region.

Wal-Mart also believes the somewhat upscale positioning of the Marketside stores, which includes the in-store fresh, prepared foods offering, is "ripe" for Bay Area consumers, who are among the most food-conscious shoppers in America.

The original Marketside development team, led by former Wal-Mart executive David Wild, conducted "Project Marketside" out of Wal-Mart's offices near San Francisco, where the retailer operates its Wal-Mart.com online business from.

It was no accident then Wal-Mart director of new business development Wild chose to do so. He lived in the Bay Area before returning to the United Kingdom to take a CEO job with Britain's leading auto parts and bicycle-maker earlier this year, and took much of the inspiration for the in-store fresh, prepared foods approach for Marketside from a number of the region's grocery chains and independents such as Andronico's Markets, Lunardi's, Draegers, Mollie Stone, Whole Foods Market and even Safeway Stores, Inc. These Bay Area grocers, along with others, are among the pioneers of in-store fresh foods merchandising in the United States.

The San Francisco Bay Area also provided a perfect backdrop for the urban strategy aspect of Marketside, which is to locate the small-format stores in big city's like San Diego and San Francisco, as well as putting them in suburbs like the suburban Phoenix, Arizona cities the first four stores set to open in just weeks are located in.

We also know Wal-Mart has searched for more than one location in the city of San Francisco itself for its Marketside stores, along with looking in San Jose and various Bay Area suburban cities.

Tesco's Fresh & Easy and Northern California

Tesco's Fresh & Easy Neigborhood Market has at least 21 locations to date locked up in the San Francisco Bay Area for its small-format combination basic grocery and fresh foods markets. Further, Tesco is in the process of looking for and gaining leases on additional sites for its Fresh & Easy stores in the Bay Area.

Tesco also currently has leases for about 19 Fresh & Easy stores for the Sacramento Metropolitan region in Northern California. It plans to add more locations in the Sacramento Metro region as well.

The first Bay Area and Sacramento region Fresh & Easy stores were scheduled first to open before the end of this year. Tesco then changed this to having the first stores open in early 2009. However, based on our sources and observation of the states of the various store projects in Northern California, it's our estimation the first Northern California stores won't likely open until at least the beginning of the second quarter of 2009, likely no earlier than April, 2009.

Fresh & Easy and Southern California

Southern California, which Wal-Mart will enter with its small-format Marketside stores, remains Tesco's number one market region for Fresh & Easy. Over half of its current 78 stores are located in the region, as is its corporate headquarters and 800,000-plus square foot distribution center. Tesco also will open many more Fresh & Easy stores in Southern California this year and in 2009.

As is the case with the four Marketside stores opening this fall in Arizona, which are all located one -to- two miles from existing Fresh & Easy markets, the planned Marketside unit in Oceanside, California also is located in that same range.

Locating the Marketside stores close to existing Tesco Fresh & Easy markets is part of (but far from exclusively) Wal-Mart's strategy with its small-format grocery and fresh foods stores.

Wal-Mart wants to see how the format differences--chief among those differences being the Marketside stores will make its fresh, prepared foods in-store (as well as having in-store seating for about 10 customers at a time) rather than having the foods prepared at a central kitchen and then shipped to the stores like Fresh & Easy does--of its Marketside stores play out head-to-head with Tesco's Fresh & Easy.

Since Marketside is merely one-part of a three format food retailing strategy for Wal-Mart--along with its Supercenters and 45,000 square foot Neighborhood Market supermarkets--the retailer plans to observe and analyze the sales at those Marketside stores located near Fresh & Easy grocery markets rather than rollout scores of stores rapidly as Tesco is doing with Fresh & Easy, which is a single food retailing strategy for Tesco thus far in the U.S.

Resources:

Click Here for a selection of Fresh & Easy Buzz past reports and stories about Wal-Mart Marketside.

Tesco PLC CEO Terry Leahy: 'We Must Go Green'

Speaking at the Coca-Cola Retail Research Council Global Forum in Bejing, China on August 22, Tesco PLC CEO Sir Terry Leahy told attendees the world's third-largest retailer and parent company of Fresh & Easy Neighborhood Market USA wants to "create a mass movement in green consumption" by making it easier and more affordable for customers to buy green products.

In his speech at the global retail research forum, Mr. Leahy said consumers want to be "green" consumers and buy environmentally-sound products, and that it is the challenge of retailers like Tesco to help them do so.

"If consumers are able to purchase lower-carbon products and services, they will reward the businesses that produce these products. This will encourage competition between businesses [and] stimulate research and development to bring forward even better products," he explained to those attending the forum sponsored by beverage giant Coca-Cola.

In his speech CEO Leahy focused on three key elements of what he said is Tesco's "green" or pro-environment strategy. Those key areas are:

>Greening the company's operations.
>Contributing to greening the supply chain.
>Empowering customers to make greener purchasing decisions.

Mr. Leahy emphasised in his speech that the third element of Tesco's "green" strategy is the one in his opinion that will make the most difference in reducing global warming, which he argued he believes is real based on all the research he has seen.

"Consumers account directly and indirectly for 60% of carbon emissions. Get the consumer on side and the task of tackling climate change becomes possible," he said in the speech.

In his speech the Tesco CEO outlined two "green" initiatives the retailer is doing in the United Kingdom, where the chain is based and where it is that nation's number one retailer with a 31% market share. The two initiatives--one designed to reduce the quantity of single-use plastic carrier bags in the stores, and the other designed to reduce carbon outputs--are part of what Mr. Leahy says are the three key elements of Tesco's "green" initiative, as we described above.

CEO Leahy said in his speech that Tesco has saved 2 billion plastic bags by creating incentive programs in its UK stores designed to get shoppers to bring their own reusable bags to the stores. As we reported previously in Fresh & Easy Buzz, Tesco plans on charging shoppers a per-bag fee for the single-use plastic bags in its UK stores as a way to further reduce the quantity of the bags it distributes in its stores in that nation.

Ironically, in the U.S. Tesco only offers free single-use plastic carrier bags in its Fresh & Easy Neighborhood Market grocery stores in Southern California, Nevada and Arizona rather than the choice of paper or plastic like nearly every other food and grocery retailer in the nation does. Most U.S. supermarket retailers believe offering consumers a choice of paper or plastic is one way of reducing the use of the plastic bags, along with selling and promoting reusable bags.

Tesco UK stores don't offer paper grocery sacks either. Fresh & Easy USA does sell reusable canvas shopping tote bags, along with what it calls "bags for life." These reusable bags sell for only 20-cents each and are made out of a plastic-like synthetic material. Fresh & Easy Neighborhood Market offers to replace these bags when they wear out for free, hence the "bags for life" name.

In addressing what some say is a contradiction between being a "green" retailer and a growing one, Mr. Leahy said that's a false choice.

"The choice is not 'green or grow,' said Leahy. "That is a false choice. You can do both - and you must do both. Reducing emissions does not merely fight climate change, it also cuts costs."

Tesco is the first and currently only food and grocery retailer in the world to have introduced carbon labels on the packages of some of its store brand grocery items. Thus far Tesco has only done this in its stores in the UK. The international retailer also is working with its suppliers to have them eventually include carbon labels on their branded products, which is something CEO Leahy says he and Tesco are committed to seeing happen.

In his speech he pledged to roll out carbon labels for each of the 70,000 products carried in Tesco stores, starting with all of the retailer's store brand items. The labels provide shoppers with information such as a particular product's carbon footprint, how many miles it's traveled from where it was manufactured to where it's being sold, and other related data. They are essentially an environmental version of a nutritional label.

You can read an edited version of Tesco CEO Sir Terry Leahy's full speech presented at the August 22 Coca-Cola global forum here.

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.

Fast Growing Aldi USA: The Lure of Plain Vanilla, No Frills Food and Grocery Retailing

From the Fresh & Easy Buzz Editor's Desk: For the last two and one-half years (including a year and a half before the first stores even opened), United Kingdom-based Tesco has been in the news in the U.S., with banner newspaper headlines like "The British are Coming" appearing frequently, touting its small-format, convenience-oriented Fresh & Easy Neighborhood Market chain in the Western United States' of California, Nevada and Arizona.

The publicity blitz started well over a year before the first Tesco Fresh & Easy combination basic grocery and fresh foods market opened in late October, 2007 in the Southern California desert community of Hemet. The grocer continues to get considerable publicity. But much of it now is about whether or not the Fresh & Easy stores are failing.

That attention to Fresh & Easy neighborhood Market is far from a mere accident. Tesco has expended much effort and spent lots of money on public relations people and outside agencies in order to get America's myriad media outlets to write about the so called "British Invasion" in the form of the retailer's 10,000 -to- 13,000 square foot neighborhood grocery stores that sell a limited assortment of basic groceries (about 65% under the fresh & easy store brand) fresh meats, fresh produce, prepared foods, craft beers and wines and a few other category items. This media attention, which has decreased considerably of late though, is by design as Tesco decided to use the "free" media instead of paid advertising to create awareness of and for Fresh & Easy Neighborhood Market.

And, of course, without any of that public relations prompting, Fresh & Easy Buzz has done its fair share of drawing attention to Tesco's Fresh & Easy Neighborhood Market as the publication of record that covers, reports on, writes about and offers analysis of the fast-growing grocery chain with 75 stores in Southern California, Nevada and Arizona.

However, Tesco's Fresh & Easy is far from the pioneer of small-format food and grocery retailing in America. Those pioneers are America's independent grocers who've been operating small-format grocery stores and supermarkets since day one, and continue to do so today in a variety of formats and styles as varied as the U.S. itself is.

As far as chain grocers are concerned, Tesco is far from the first, the biggest or even the fastest-growing small-format grocery chain in the U.S.

There's SuperValu, Inc.'s Sav-A-Lot, which are no frills, small-format, limited assortment grocery stores located throughout America. There currently are more than 1,600 Sav-A-Lot stores in the U.S., and SuperValu is growing the chain fairly aggressively.

In terms of hybrid convenience-oriented combination grocery and fresh foods markets, Wawa, Inc., which is based in Pennsylvania, has been doing this sort of food and grocery retailing for decades in America. With about 500 stores located throughout the eastern U.S., Wawa is a pioneer in merchandising ready-to-eat and ready-to-heat prepared foods, along with a limited assortment of basic and specialty groceries, fresh foods and even traditional convenience store fare tossed into the mix.

Then there's the the U.S. division of German-based small-format, no frills discount supermarket chain Aldi, known in the U.S. as Aldi USA. It's arrived in America long before Tesco even thought about its British Invasion with Fresh & Easy, although the Aldi and Fresh & Easy store formats do have many qualitative differences, along with many similarities.

With about 950 stores located in the Midwest, Mid-Atlantic and eastern regions in the U.S., and with hundreds more to come in the next couple years, Aldi is taking America by storm. It's ranked by the industry trade publication Supermarket News as the 25th-largest supermarket chain in the U.S. by annual sales volume (about $5.8 billion in 2007); and that's with only 950 stores, each averaging only about 12,000 -to- 14,000 square feet in size, which is about a third of the size of an average U.S. supermarket being built today.

Family-owned Aldi also is a growing presence in the United Kingdom (where Tesco is based), where Tesco controls about 31% of that nation's food and grocery sales market share as its number one food retailer.

In the last two years, Aldi UK has been the leading percentage gainer in terms of annual market share growth, even though it remains a small player currently in the country with about 6% of total market share. That's because it has far fewer stores than the major players, Tesco, Wal-Mart-owned Asda (about 17% share), Sainsbury's (15%), Morrisons,(number four chain in the UK) the Co-operative group (number five) and others.

However, when one looks at the number of stores Aldi has in the UK, especially compared to Tesco which has about 1,700 in the small country, its market share is extremely impressive, as is its sales and market share growth rate.

Back in the U.S., 950-store Aldi USA is on a major growth spurt, opening 75 -to- 100 new stores a year for the next five years, according to CEO Jason Hart.

Currently, Aldi is making a push into Florida, where its recently opened its first stores, along with a new distribution center designed to serve the market. Aldi has big plans in the Florida market with its little stores, as well as continuing to open new stores throughout the Midwest, Mid-Atlantic and eastern USA regions.

So far Aldi has remained east of the Rocky Mountains, not yet venturing into the Western U.S. with its powerful no frills, small-format discount grocery stores. However, ther've been numerous rumors the grocery chain could do just that; cross the Rocky's into the Western USA states and food and grocery retailing market where Tesco is focusing its efforts in California, Nevada and Arizona with its Fresh & Easy grocery stores.

We've not been able to get anything definitive yet on this potential development regarding Aldi USA coming west. And we know it's not in the grocery chain's plans for 2009 and 2010.

However, after that, since the grocer wants to be a national presence in the U.S., crossing those Rocky Mountains into the Western U.S. market would only make logical sense. It also would shake up food and grocery retailing in the Western U.S. just like Aldi is in the rest of the country. And for Tesco's Fresh & Easy, it would be a competitive threat the retailer might not be able to combat.

There is a current Western U.S. connection to Aldi USA though.

Aldi is owned by a pair of interesting and reclusive brothers named Theo and Karl Albrecht. In the 1960's the brothers, who are now both in their 80's, divided their ownership of the chain in half because one wanted the Aldi stores throughout the world to sell cigarettes and the other didn't. Additionally, in 1979 Theo Albrecht bought the Southern California-based small-format discount specialty and natural foods grocery chain Trader Joe's from Joe Coloumbe (The Joe in Trader Joe's), the super-successful chain's founder.

With only about 312 stores in the U.S., the small-format (about 10,000 -to- 12,000 square feet) Trader Joe's stores do even more sales per-square-foot than the Aldi stores do, even though they don't offer basic grocery items.

Trader Joe's is ranked 23rd, two places above its cousin Aldi USA, by the supermarket industry trade publication Supermarket News, even though it has one-third the number of stores as its cousin Aldi, and doesn't sell basic grocery items. In fact, most U.S.-based supermarket industry analysts rank Trader Joe's, which had sales of about $6.5 billion in 2007, as having the highest sales-per-square foot of any food and grocery chain in the U.S. You can do the math. A total of about 312 stores, averaging only about 10,00 square feet each, and $6.5 billion in annual sales. That's impressive sales per-square-foot for any format grocery chain, particularly one that focuses on natural and specialty foods.

Although Aldi USA gets lots of attention from industry publications and analysts like Fresh & Easy Buzz and industry trade publications like Supermarket News and a couple others, the mainstream U.S. business press writes very little about the no frills, small-format discount grocery chain. That's changing though.

This is how Aldi basically likes it. The retailer is very private and in a strategy 180 degrees different than Tesco's with Fresh & Easy, it sends out virtually no press releases and devotes little if any energy and money to public and media promotion.

Instead, Aldi USA focuses on merchandising in-store and promotion via a weekly printed and online advertising flyer featuring everything from basic grocery items, non-food items and fresh foods, to in-and-out promotional items like hardware, computers, furniture, clothing items and more.

However, the poor U.S. economy, which among its negative aspects are soaring food and grocery prices, has drawn the attention of not just consumers but of the mainstream media to Aldi USA and its low everyday prices and bare bones stores. Aldi stores have been reporting record customer counts and sales in the U.S. in the down economy as also is the case in the United Kingdom and the rest of Europe.

Despite Aldi USA's lack of media self-promotion, today's New York Times has an article about the fast-growing small-format, no frills discount grocery chain. The piece, titled "The allure of plain vanilla," provides a good overview of Aldi USA, along with some overall information about the company in general and how it's brand of no frills discount food and grocery retailing is fitting well into these bad economic times.

Should Aldi USA decide to come west over those Rocky Mountains in the next two years or so, we guarantee you the media attention level will be at high buzz, despite the grocery chain's low-key PR ways.

In the meantime, we wanted to bring you the piece from the New York Times about Aldi USA. Here it is below:

The Allure of Plain Vanilla

By ANDREW MARTIN
New York Times
September 6, 2008

LIKE its reclusive German founders, the supermarket chain Aldi doesn’t do much to draw attention to itself.

Its stores are small and spartan, with minimal décor and a limited selection of products. They are often found in nondescript shopping strips and lack the flashy signs and window displays of some competitors. Grocery carts cost a quarter apiece, which is refundable after the cart is returned.

But as the economy sputters and consumers look to save money, the privately held Aldi is suddenly emerging as a major force in the grocery business, one that some predict could one day rival Wal-Mart.

What makes Aldi so special is that, quite simply, its prices are cheaper than just about anyone else’s, including Wal-Mart’s. Where else can you buy an 18-ounce box of raisin bran cereal for just $1.49? Or a frozen pizza for $3.99? Or how about a DVD/CD player for $24.99?

Click here to read the complete article.

New Store Openings: Fresh & Easy Has A Milestone Opening of Sorts Yesterday in Murrieta, California

Tesco's Fresh & Easy Neighborhood Market had a milestone new store opening of sorts yesterday, opening its 75th small-format combination basic grocery and fresh foods market in the Southern California city of Murrieta.

The Murrieta Fresh & Easy, which is one of the grocer's built from the ground up stores rather than being one housed in a remodeled retail building like the majority of its grocery markets currently are, held its grand opening Wednesday morning, getting a strong crowd of first day shoppers looking for bargains, along with curiosity seekers and about 25 pickets from the United Food and Commercial Workers (UFCW) union in attendance.

UFCW pickets

The UFCW demonstrators, who were largely ignored by shoppers and others attending the store grand opening, according to a Fresh & Easy Buzz correspondent who was at the store opening, were there protesting Tesco's refusal to meet with union leaders to discuss the potential of unionizing the U.S. Fresh & Easy chain.

United Kingdom-based Tesco, which is that nation's leading food and grocery retailer and the third-largest retailer in the world after France's Carrefour Group and number one Wal-Mart, Inc., has union affiliations in all of the nations where it does business except in the U.S.

The UFCW has been conducting a campaign designed to get Tesco executives to meet with the union's leadership in order to discuss the Fresh & Easy Neighborhood Market USA unionization issue.

Thus far Tesco has said it has no plans to meet with representatives from the union, saying its position is the UFCW is free to organize Fresh & Easy store-level workers in accordance with U.S. labor laws, and that it is up to store employees as to if they want to vote in union representation or not. Tesco is not required by U.S. labor laws to meet with the union's leaders.

Bargain hunters

Tesco mailed out its $5-off coupons, which are good for grocery purchases of $20 or more in the Fresh & Easy stores, to residents of the neighborhood surrounding the Murrieta store at 395530 Murrieta Hot Springs Road prior to yesterday's grand opening.

Many of the shoppers at the store Wednesday morning had these discount coupons in hand as they roamed the store's aisles in search of bargains and grand opening day deals, according to the Fresh & Easy Buzz correspondent who attended the store opening yesterday morning.

Shopper response

According to our correspondent, the general response from the store's opening day shoppers was a positive one. One shopper said she lived just 15 minutes away from the store and welcomed its opening because with the high price of gasoline she has cut back on her driving and plans to do much of her shopping at the Fresh & Easy store now that it is open.

Another opening day shopper told our correspondent that she had the day off and decided to attend the store opening because of the $5-off coupons she received. She was looking for grand opening specials she said and planned to use the coupon to save even more money. Asked if she would shop the store without the deep-discount coupon, she said she wasn't sure of that but that she might, although she said she loves Trader Joe's.

Built from the ground up store

The Murrieta store, like the handful of other built from the ground up Fresh & Easy markets currently open, is a big improvement design-wise over the stores located in former retail buildings. It features large windows in the front of the store, along with skylights that illuminate the inside of the store, creating a much warmer feel than the stores in the remodeled retail buildings do.

The built from the ground up Fresh & Easy stores also are much greener environmentally than the stores housed in the former retail buildings. The building's design is to much higher environmental standards than the stores in the older, remodeled buildings, for example.

Organics big hit

According to our correspondent, one of the big hits at the store yesterday seemed to be the fresh and easy brand organic food and grocery items which tend to be priced at least 15% (and sometimes more than that) below the everyday prices of similar items at such natural foods retailers as Whole Foods Market, Inc. and supermarket chains like Safeway. Customers were grabbing up discount-priced organic fresh produce and grocery items at the store yesterday in considerable quantities, our correspondent said.

More on UFCW picketers

The 25 or so UFCW union picketers made their presence know outside the store, carrying signs that said: "There's nothing fresh about fresh & easy," which is the theme the union is using on its website http://www.freshandeasyfacts.com/ and in its direct mail flyers, as we've reported in Fresh & Easy Buzz.

The UFCW has had pickets, many who are union members and work for unionized supermarket chains like Safeway's Vons, Kroger's Ralphs and others, at nearly every new store grand opening Tesco's Fresh & Easy has had this year in Southern California, the Las Vegas, Nevada Metropolitan region, and the Phoenix, Arizona Metro area, the three markets in which its small-format neighborhood grocery markets are located.

Chris Lopez, a spokesman for the UFCW pickets outside the Murrieta Fresh & Easy store yesterday morning told our correspondent in explaining why he and the others were picketing the store opening: "Fresh & Easy mostly only hires workers for part-time positions and the company has not been adhering to grocery worker standards set by the union."

Lopez is a UFCW member and works at a Vons supermarket in Southern California.

Tesco's Fresh & Easy employees about 25 people per store. All store-level employees except the store manager and sometimes the assistant manager are part time employees. Part time store workers make a starting salary of $10 an hour. They receive a health insurance plan which Tesco says pays 75% of their expenses if they work a minimum of 20 hours a week.

Although the hourly pay is less than UFCW member supermarket clerks make, and the health insurance benefits not as extensive, Tesco's Fresh & Easy Neighborhood Market hasn't had problems filling store-level jobs thus far, although turnover has been fairly high at some stores.

In addition to Tesco's Fresh & Easy, other major non-union food and grocery retailers in Southern California include: Wal-Mart, Inc., Trader Joe's, Winco, Whole Foods Market, Inc., Sprouts Farmers Market, and Henry's Farmers Market, along with a few others.

The region's major supermarket chains like Safeway's Vons, Kroger's Ralphs, SuperValu, Inc.'s Albertsons and Bristol Farms, Stater Bros, Gelsons and most others are unionized and the employees are members of the UFCW. In terms of market share, unionized food and grocery retailers comprise about 70% of the total food and grocery dollar sales market share in Southern California.

More new stores to come

Yesterday's opening of the Murrieta Fresh & Easy grocery store is part of a rapid new store opening spurt for Tesco's Fresh & Easy in Southern California, Nevada and Arizona. The grocery chain is opening 30 -to- 35 new stores over a 90-day period, from July 2 to the end of September.

The retailer will open additional new stores from October to December in its three existing markets and plans to start opening its first stores in California's Central Valley and in the San Francisco Bay Area and Sacramento Metropolitan region in 2009.

News & Analysis: Tesco's Fresh & Easy Launches New Direct Mail Promo Piece Full of $5-Off Discount Coupons; Is it Taking Deep-Discounting Too Far?

Tesco's Fresh & Easy Neighborhood Market is distributing a new, price discount-focused direct-mail brochure this week, featuring three of its $5-off coupons good on any total grocery order of $20 or more, to households in the neighborhoods where is small-format combination basic grocery and fresh foods markets are located.

As pictured at top, the front of the direct-mailed promotional piece features a photograph of a canvas shopping bag filled with a 2-Liter bottle of Coke soda pop, a loaf of bread and a couple other grocery items.

Outside of the bag are images of fresh & easy store brand bottled water, milk, orange juice and a bag of apples, all which are basic or staple grocery items.

The promotional brochure's tag line is: Everyday low prices. Quality you can trust.

The combination of the pictures of everyday, staple food and grocery items combined with the price/value and quality tag line is an attempt to position the stores (using the promotional piece) as a shopper's choice for low prices and high quality (which equals value) everyday, which is a clear pitch to create primary grocery shoppers, as we've said Tesco must do in order to succeed in its strategy of designing the Fresh & Easy chain to be an everyday food and grocery shopping venue rather than a specialty foods store.

Near the canvas grocery bag filled with groceries at the top of the mailer, Fresh & Easy offers the following quotes from a couple U.S. newspapers about the stores, in an attempt to create a form of "third party endorsement" of the grocery chain:

"They're about the size of a Trader Joe's with lot's of Whole Foods-type natural foods and prices that can seem costco-esque."
USA Today, April 7, 2008

"The new Fresh & Easy markets get a big thumbs-up from customers for product selection and lower prices."
Los Angeles Times, November 9, 2007

Inside the brochure is where Fresh & Easy makes its major statement though, which is the price focus with the deep-discount coupons.

The inside of the mailer contains three $5-off coupons (pictured above) good for any total grocery purchase of $20 or more at a Fresh & Easy Neighborhood Market grocery store. This amounts to a 25% discount on a grocery purchase of $20, which just about eats up the gross margin on that $20 sale.

Tesco's Fresh & Easy has been using these $5-off on a $20 purchase coupons for some time. However, including three in one direct-mailed promotional brochure to a household is very aggressive from a price discount standpoint. It also makes us wonder if there isn't some desperation behind such a move?

Usually a grocery retailer will include one such coupon (and not usually for that deep of a discount) in a mailer as a way to generate consumer trial in its stores, then hope to gain return trips from shoppers once they shop the grocery store that first time using the coupon.

From a marketing standpoint we can't help but wonder if including three of these deep- discount coupons, along with the aggressive manner in which Tesco gives these $5-off on a $20 purchase in its Fresh & Easy stores, isn't creating price-focused coupon shoppers rather than building store loyalty among consumers to the Fresh & Easy retail brand. [Readers are telling us they are getting two or three of these $5-off coupons each time they make a purchase at the Fresh & Easy grocery stores in Southern California, Nevada and Arizona.]

Of course the economy is in such bad shape in the U.S. that aggressive discounting has become the norm among nearly all grocery chains. However, Fresh & Easy has been using these $5-off coupons since its first stores opened in the fall of 2007. As such, since the retailer has been using them aggressively since day one, it runs the risk of creating a customer base that's shopping the stores primarily because of the deep discounts the $5-off on a $20 purchase coupons provide, in our analysis.

As an example, Tesco uses similar coupons in the United Kingdom, where they're referred to as vouchers. However, those coupons are worth about 50% less than those the retailer is using for Fresh & Easy. As a result, they take a much smaller bite out of gross margin.

Tesco's Fresh & Easy carries its value theme over onto the back (pictured above) of the direct mail promotional piece, where it offers the following text:

"We're a neighborhood-sized market that's quick and easy to shop."
*Fresh and wholesome foods
*Unbelievably low prices
*all your favorite brands
*a variety of prepared meals

The meat and potatoes of the promotional brochure however clearly are the three $5-off on a minimum $20 purchase coupons.

As such, in our analysis the marketing message of the new direct-mailed Fresh & Easy promotional piece really isn't value, despite the text and images suggesting so. Rather, the message is really price, demonstrated by the coupons providing a 25% discount on a $20 grocery purchase. Everyday low-price positioned food retailers in the U.S. seldom if ever use deep-discount promotional techniques like this.

We don't offer this analysis as a criticism per se. Rather, we offer it as an object lesson that value means far more than price. We think Fresh & Easy is attempting to make a value statement with the new direct-mailed piece. But because the coupons (and the deep discount they represent) are so prominent, it's our assessment the brochure's statement is loud and clear: price discount.

This is a good short term strategy for Fresh & Easy in some ways. After all, competing food retailers are fighting for shoppers' food dollars in this period of soaring food and gasoline costs in the U.S. However, since Fresh & Easy is not yet a year old and has used these deep discount coupons since day one, our analysis is that there is a significant body of the retailer's customers that only are shopping the stores because of the deep-discount coupons. This poses a potential problem for Tesco in terms of building its Fresh & Easy brand we believe.

For example, Trader Joe's and Costco, both retailers quoted in the newspaper quotes Fresh & Easy chose to put on the front of the flyer, are offering very little if any in the way of deep price discounts even in the current poor U.S. economy. And neither of these two retailers are offering anything in the way of coupons equaling a 25% discount on a $20 grocery purchase.

Rather, Costco and Trader Joe's are focused on being everyday low-price discount retailers in their respective niches, offering products at everyday low prices in-store.

Of course both retailers have the advantage of not being start ups like Teco's Fresh & Easy is. But neither of these two retailers built their respective strong food retailing brands by focusing on deep discount coupon promotions. Instead both have focused on the value proposition: low everyday in-store prices, quality, and some minimal promotion. Consumer perception of both Costco and Trader Joe's is that they offer low prices everyday. Therefore 25%-off coupons aren't needed in the main to lure shoppers to the stores.

At some point in the not too distant future, Tesco's Fresh & Easy is going to have to wean itself off of offering the deep discount coupons or at least lower the value to be more in line with what it offers (50% less value) in the United kingdom.

The retailer will have to do this because as we've reported based on information from sources in a position to have direct knowledge, Fresh & Easy's current gross margins are less than enviable and need to be improved considerably. It's difficult to do so using the deep discount coupons so aggressively. Price can be a non-therapeutic drug to a food retailer in terms of generating and keeping customer counts and sales.

When this day does occur, the numerous customers who base their shopping at the Fresh & Easy stores on using these deep discount coupons also will have to wean themselves off of the substantial savings these coupons provide them.

At that point, Tesco's Fresh and Easy Neighborhood Market will have to replace this price-centered motivation among shoppers to shop the stores with something else. That's no easy task.

It's clear Tesco's positioning of Fresh & Easy Neighborhood Market is to be a primary and secondary food and grocery shopping venue with an everyday low price focus--value. What isn't clear is how the aggressive use of coupons offering a nearly 25% promotional discount helps achieve that goal.

No doubt it brings shoppers in the door. And that is important. But it's doubtful it's lending any help in building the Fresh & Easy brand.

Another danger is that once Tesco decreases the value of the coupons as we described above, customers' market basket (dollar amount of groceries purchased per shopping trip) also will decrease.

Why? Because the $5-off coupons inflate the average ring in the stores because customers are able to purchase about 25% (in dollar value) more groceries than they would if the coupons didn't exist. And since they are being used so ubiquitously by Tesco, rather than on a limited basis, they could create a defacto price expectation in the minds of shoppers. So used to getting $5-off a $20 grocery purchase customers could come to expect that built in discount. Reduce the coupon value by half or take it away and shoppers could merely reduce their purchase amount per trip accordingly.

For now though shoppers aren't complaining. But they just might complain with their pocketbooks and their feet if the deep discount coupons they're getting as a regular course get reduced in value or stop coming in the mail or being handed out in the stores to them on each trip.

It's a tough marketing juggling act with potentially dangerous results, as all marketers who have worked at the crossroads of building brand and dealing with price deep-discounting are well aware of.

Brand loyalty seldom if ever is built on deep price discounting. And the first year or so a new food and grocery retail chain is launched often sets the stage for how consumers percieve that particular retailer.

No grocery chain wants the answer from consumers in response to the question: 'Why do you love your grocer? to be: 'I love my grocer because it always gives me 25%-off coupons every time I'm in the store and regularly mails them to my house.' Why? Because doing so isn't something any food retailer in the United States can sustain doing over time unless it raises its everyday prices by an equal amount to offset the regular deep-discount coupon use. That's a reality in the low-margin food retailing business.

Fresh & Easy Gets Local; Creates Free 'Indie' Music Concert Series at its Hollywood, CA Store For September

Tesco's Fresh & Easy Neighborhood Market in partnership with Southern California radio station indie 103.1 is launching a free acoustic music series starting this Thursday at its Hollywood, California grocery store.

The free musical events, which will be held each Thursday evening at 7pm in the outdoor courtyard of the Fresh & Easy store at 7021 Hollywood Blvd., are being called the Blank Canvas Series at Fresh & Easy.

The performers, all from the indie music scene, include: Nico Stai (September 4); Anya Marina (September 11); Meiko (September 18); and Greg Laswell (September 25). You can learn more about the performers here.

As an interesting addition to the music, during the Thursday evening concerts artists will be on hand at the Hollywood Fresh & Easy store custom-painting reusable canvas shopping tote bags. Customers who spend $50 or more at the store will receive a free hand-painted tote bag.

Fresh & Easy Buzz likes the concept and promotion. First, the tie-in with the indie radio station and the Hollywood store located on Hollywood Blvd. is a good one, since the demographics of the neighborhood's residents fit well with the demographics of indie music listeners.

Additionally, who doesn't like free? The free music series offering is a good way to draw attention to the store by providing customers and potential customers with free entertainment. There's no hard sell such as having to make a purchase to listen to the music and the like. Soft sells always work best. It's all value-added.

The free music series also is a good positioning tool for the Hollywood store. Indy music is hip and Fresh & Easy wants to be perceived as somewhat hip. Therefore it's a good marriage of music and store format we think. Grocery stores should be social places as well as ones of commerce. Music is a great social lubricant.

Lastly, the store-specific music series is good local marketing. It matches the store's neighborhood, Hollywood Blvd., with something many residents and visitors to the neighborhood enjoy--indie music.

Since we've been critical of Tesco's Fresh & Easy for not putting a local design, marketing and merchandising focus on its stores, we want to give the grocery chain props for doing so in its tie-in with the indie radio station for the September music series at the Hollywood Blvd. store in Hollywood, California. It's a good fit in our analysis.

Grocery stores and supermarkets are different than most other retail formats in that they sell the most essential of all commodities--food. As such they've historically have served as focal points for people in communities and neighborhoods.

The more of a sense of place a food retailer can create in its stores in terms of physical design, community and ambiance, the more successful generally that grocer is. That's one reason independent grocers continue to survive and thrive in the U.S. while they've nearly gone the way of the horse and buggy in many other western industrialized nations.

Events like the music series at the Hollywood Fresh & Easy, along with incorporating some local design elements and local merchandising features, help create this neighborhood sense of place. Consumers tend to reward such food retailing by spending their money at the stores of grocers who factor in this important consideration, along with the basics like product selection, pricing and service.