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03.04.2009

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Tesco’s Fresh & Easy Finally Comes Clean

Before the economic tsunami came crashing ashore in the fall of 2008, most of the chatter in our corner of the world concerned Fresh & Easy, Tesco’s first foray into the US grocery market. After too many years of discussion and analysis about Walmart, marketers, journalists, and analyst types were understandably excited by the twin prospects of a new story, not to mention a completely new retail format.

Equally inspired, we at The Hartman Group were one of the first to provide a comprehensive, consumer-driven analysis of Fresh & Easy with our white paper in February 20081. Suffice it to say, our general conclusions from that report were far from optimistic. While we won’t waste print space restating specific criticisms and challenges, our larger contention was that Fresh & Easy felt like a stranger in a strange land; as if it were dropped down from the heavens above as a prefab solution to a hypothesized set of consumer “needs”2. Far from the category killer many had suggested, Fresh & Easy seemed, er, flat. Or, as one particularly insightful consumer summed it up, “I just don’t get this place.” The bottom line was that we predicted Fresh & Easy was headed for serious trouble in the US.

In the ensuing year since that report’s publication, there’s been a vigorous public dialogue in analyst circles and other forums as whether or not Fresh & Easy was succeeding. What was interesting in those debates was that any discussion of actual consumer reactions to the store consisted primarily of the observation that there were surprisingly few customers to be found in the aisles. Meanwhile most of the analyst discussions focused on one or two “marketing propositions” that Fresh & Easy was allegedly failing or succeeding on:

    “Say what you will, their mix of private label with premium brand seems like a sure fire hit to us…”

    “You have to love what they’re doing with fresh, prepared and RTE options…”

    “So far Fresh & Easy doesn’t appear to be keeping a firm hand on pricing margins…”

Missing in many of these discussions was any real consumer-centric perspective as to what was compelling, special or unique about Fresh and Easy. In other words, if Fresh & Easy is working, than who is going there and why? And if not, why aren’t they shopping there?

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Of course, analyst dialogue has its limits. There’s only so far one can get with anecdotal accounts and armchair strategizing. So, we were that much more curious when Tesco recently broke their silence and admitted publicly to some serious challenges facing Fresh & Easy. These challenges were noted in recent interviews with several top executives at Tesco.

Yet, while finally admitting publicly that, indeed, Tesco had stumbled with its Fresh & Easy rollout in the U.S., most of the comments were relegated to price as an abstract marketing proposition. Specifically, Tim Mason (head of Tesco’s U.S. business) noted:

    "We may have assumed that certain elements of the Fresh & Easy brand would do the work for us and we would not have to go down and dirty on price. That may have been a mistake,"

And in classic problem-solving form, the folks from Tesco have already isolated the source of this error, apparently a failing of market research:

    Marketing director Simon Uwins said: “We went into people’s houses, talked to them about food and food shopping. We went into their kitchens and poked round pantries.” Unfortunately, Mason now admits, they did not poke around their garages, where they would have found huge freezer chests bulging with stockpiled meat bought on special offer.

Apparently the answer is all about price, and they would have known this if they had just opened up some doors and headed down into their consumers’ garages and basements.

We find the decision to focus on price particularly bizarre because from the beginning, Fresh & Easy always promised aggressively low everyday prices. To that end, our initial research actually highlighted price competitiveness as one of the few areas to receive high marks from consumers given the typical shopping occasions encompassed by Fresh & Easy.

And for that matter, why on earth would the folks at Tesco ever believe that Fresh & Easy should be competing for consumers who purchase meat by the freezerload?

All of our research always points to one inescapable conclusion: food retailers — be they large or small, mass or specialty — are always a local thing. They’re (quite literally) part of the fabric of the local community — for better or worse. This doesn’t mean that broader, corporate strategies or initiatives can never be effective, but you have to nail down the local part before you can expect to be successful. This is Tesco’s major misstep and tinkering with pricing guns is going to have little effect here.

Perhaps this is what is most distressing about the Tesco executives comments regarding pricing. One wonders if they truly have a firm grasp of the nuances of the retail experiences — and their related shortcomings — that they have created. Or, alternately, are they making the age old blunder of utilizing price as a lever of last resort?

This, we submit, is the real challenge facing Tesco’s entry into the U.S. Rather than building a relevant food shopping experience from the bottom up, in a manner that makes intuitive sense to the folks that are expected to shop there regularly (the local culture), the powers that be at Tesco continue to design and execute from afar — via white boards and conference rooms. It’s not enough that they (quite literally) created Fresh & Easy in the form of a branding exercise designed to “solve” the maximum number of consumer “problems.” Now that they have admitted they are “stumbling” they continue to manage these challenges with the same ineffectual processes that brought the shortcomings on to begin with.

All of our research always points to one inescapable conclusion: food retailers — be they large or small, mass or specialty — are always a local thing. They’re (quite literally) part of the fabric of the local community — for better or worse. This doesn’t mean that broader, corporate strategies or initiatives can never be effective, but you have to nail down the local part before you can expect to be successful. This is Tesco’s major misstep and tinkering with pricing guns is going to have little effect here.

What is Fresh and Easy Really?

We have visited over a dozen Fresh & Easy locations (some on multiple occasions) with a diverse collection of colleagues, clients, cronies, industry veterans, raconteurs, trade folk, media figures — and more than a few characters thrown in for good measure.

And with very few exceptions, the initial gut reaction to Fresh & Easy was nearly always one of confusion and befuddlement. As in “Huh?” “So this is Fresh & Easy? “Is this all there is?”

To be sure, a certain amount of “unclarity” or even mystique regarding a retail experience can often be a good thing — assuming that what follows manages to build positively upon the uncertainty at hand. But in the case of Fresh & Easy, such unfamiliarity rarely resolved itself in a positive light.

But one particularly astute client really nailed the essence of the experience when she quipped, “It’s like the place was designed by a bunch of Dilberts…It’s as if the place purports to solve all kinds of vexing marketing “problems” while failing to address the most basic of real world problem. Namely, why would anyone even want to come here to begin with?” It is at once everything and nothing; the idealized solution to a problem that never existed.

A Modest Proposal for Rescuing Fresh & Easy From Certain Doom…

For starters, instead of blaming your market research team, consider the insight process itself. Anyone who has spent countless hours traipsing through consumers’ houses and pantries — as well as their grocery stores — should have known that the consumer’s relationship to their local grocer is much deeper than a freezer-load of discounted beef might reveal.

And while we’re at it, don’t make the all too common — and often tragic — mistake of assuming the need to compete on price. As we’ve said before, when marketers are at a loss for strategy, the simplest decision is to initiate a price war. Unless your foundational business model is forged from the bottom up to compete on price — as in the case of Walmart — this is not a fight you will ever win.

So put down the dry erase markers and begin reengineering your retail experience at the store level — from the bottom up — with a keen eye toward the types of products and experiences your consumer desires.

And do be aware that these desires may differ significantly from store to store. This doesn’t mean there is no place for centralization or value-add in creating a unified branding experience. Rather, it merely suggests you will need to constantly balance the marketer’s desire for branding against the local customer’s desire for customization.

What you’ll end up with will be a collection of retail outlets that may not much resemble your original plans, but they will make a whole lot more sense to your consumer.

The footnotes for above:

1"Tesco's Fresh & Easy Neighborhood Market: How Fresh? Does Easy Matter?" The Hartman Group, Inc. January 2008

2The obvious references to British Colonialist History have not gone unnoticed by many in the analyst community




2008 White Paper
Tesco's Fresh & Easy Neighborhood Market
How fresh? Does easy matter?

Through retail immersion, The Hartman Group examined firsthand Tesco’s small format entry into the U.S. market. Our white paper analyzes some of the challenges Tesco will have to overcome to be successful in the U.S. marketplace.

Click here to order and download the white paper: Tesco's Fresh & Easy Neighborhood Market


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