From the Editor
Tesco's Hard Road Ahead
Rarely has a study been as apropos as the Olson Communications study on freshness, which is the subject of an article by Sharon Olson on page 16.
The power of freshness as a marketing tool is amply illustrated by the fact that Tesco, the United Kingdom’s largest retailer and one well known for doing its research, elected to name its new American concept Fresh & Easy. Look at Tesco’s web site and under a banner reading “Everyone deserves fresh healthy food,” you’ll see how they describe their stores:
Smaller than the usual supermarket, our 10,000 sq. ft. shops will be easily accessible and offer everything from everyday staples to gourmet items. Lots of fresh and delicious food choices, including pre-prepared and organic foods, will make healthy eating convenient and affordable. In particular, our own Fresh & Easy line of products will have no added trans fat and no artificial colors or flavors. The simple packaging and labels on our private brand will help you see exactly what you’re bringing home – great food you can trust.
To some extent, Tesco’s positioning is similar to Whole Foods Market — an organic, natural, environmentally friendly, healthy sensibility — but it also has a gastronomic positioning similar to Trader Joe’s with its heavy emphasis on private label and gourmet items. And it proposes to do all this at a price that will be recognized as mainstream.
It won’t be easy. And freshness is a big part of the reason why.
The concept Tesco proposes to open in the U.S. is loosely based on the Tesco Express stores in the U.K. These stores focus on prepared foods sold under a private label and are very successful. But the concept is heavily urban in the U.K., and the model customer is the woman getting off the Tube and stopping to pick up dinner on the way to her flat.
In the U.S., the concept is opening in Phoenix, Las Vegas and parts of southern California. This is more suburban territory, and it will be a real challenge to get people to stop, get out of their cars and pick up dinner at these 10,000 square-foot stores. Even if they succeed, the density of population in the U.S. is so much less than that in the U.K., it will be hard to sustain sufficient movement of a wide variety of prepared foods to keep them all fresh.
People who have tried ventures focused in this way often find themselves in a death spiral: The sales are insufficient to support the hundreds of SKUs of Thai, Indian and many other cuisines in the bountiful section filled with fresh prepared foods. Thus shrink numbers start killing the store.
To reduce the shrink, two logical steps are taken: The assortment is “rationalized” to eliminate many slow moving items, while the quantity of each item ordered is reduced. Predictably, the assortment is now not so outstanding and the out-of-stocks are annoyingly frequent. This further reduces sales, pushes shrink numbers up again and leads to the cycle repeating.
By the time you’re done, they have rotisserie chicken, a pizza program and a sub shop and no reason for anyone to go there anymore.
Freshness is very easy to aspire to, but very hard to implement. This author remembers visiting the first Eatzi’s and being enormously impressed by the fantastic assortment of fresh foods. The store had an arrangement with the Culinary Institute of America to provide chefs and they were plentiful. A quick walk through the store, and
one could easily assume you had found the fresh nirvana.
However, whenever one tried to actually buy fresh food at an Eatzi’s in the normal course of life, one quickly learned that it was something of a fresh bait-and-switch. During lunch hour, for example, it was almost impossible to wait for your food to be freshly made and get back to the office in any reasonable amount of time. Attracted to the store by its fresh salads, sandwiches, etc., inevitably, the long lines were frustrating and one wound up buying one of the pre-prepared and packaged salads and sandwiches.
They weren’t bad, but they weren’t freshly made and they weren’t why people were coming to Eatzi’s. This may explain why Eatzi’s , which was supposed to be the next big thing, fizzled out.
The Tesco concept also seems a bit contradictory. When people read that Tesco will have “lots of fresh and delicious food choices,” the heart leaps but when they next say “including pre-prepared and organic foods,” one senses confusion. Pre-prepared isn’t fresh; it is the opposite of fresh. And organic, well that refers to the nature of ingredients or products, but a two-week-old head of organic lettuce is just as wilted as a two-week-old head of conventionally grown lettuce.
Also tied into notions of freshness are notions of authenticity, and in the U.S., where ethnic food is common, authenticity comes from buying from an authentic place — Italian food from an Italian restaurant, Chinese food from a Chinese restaurant and so on. In rural areas where ethnic restaurants may be scarce, some supermarkets, such as Wegmans Food Markets, have filled the gap and a few supermarkets have identified themselves with particular ethnic groups such as Waldbaum’s in New York and Genuardi’s Family Market in Philadelphia.
In the U.S., though, restaurants have a significantly higher share of stomach than they do in the U.K., and Tesco is likely to find restaurants a difficult competitor. No matter how high its quality, a chain supermarket like Tesco, relying on centrally located prepared foods suppliers, is likely to struggle with both freshness and authenticity.
Tesco’s concept is new for America and thus truly fresh, but implementation is unlikely to be very easy. TB