British supermarket chain Tesco is considering closing down its 200 American Fresh & Easy grocery stores after they failed to deliver acceptable shareholder returns, the company announced Wednesday.
The chain, headquartered in Los Angeles, launched in 2007 and over the last five years invested $1.6 billion to open its American stores. The Fresh & Easy model is to be smaller than a supermarket, but larger than a convenience store and to offer fresh foods and produce. The stores, located in California, Arizona and Nevada, are often opened in areas known as food deserts- because of their lack of major grocery stores - and near new housing subdivisions.
But after the economy tanked in 2008, bringing the subprime mortgage crisis with it, Fresh & Easy saw diminishing returns. A 10,000-square-foot store opened in 2011 in San Francisco's Bayview neighborhood next to a new condominium project, where grocery stores selling fresh foods and produce are scarce.
It seemed like Tesco did everything right in its US bid when they opened to much fanfare 5 years ago. Fresh & Easy offered something different on top of a reasonable selection of quality goods at competitive prices and opened in uncompetitive areas.
But, for some reason, they have never taken off. I have two in my town, they are both too out of the way for me to go to regularly, but they have a good selection on the things they carry, I mostly buy beer there, since it is priced better than the grocery stores.
In all, I think their goal of rapid expansion got the best of them and they are suffering a similar fate to that of Krispy Kreme.
So, with all that said, those of you in the Western States who have been to a Fresh & Easy, what did you think? Surprised they are going under? Or surprised they didn't go under sooner?
For our friends across the pond in the UK, what is Tesco like there? Is it self-service "Chip and PIN" (the term they used on Sherlock, I'm trying to get on your level here) like it is here? Do they offer their own brands? How is the quality of the merchandise? What is the grocery competition like in the UK?
Getting profitable is a long road in a new country. McDonalds did not get any profit for 20 years in Finland, they just pumped international money to keep them running.
The German Lidl grocery store chain has similar concept. They've been selling food for really cheap and making loss. Building new supermarkets costs a lot and they have to attract customers with cheap prices. After 10 years, it's starting to make profit because they're starting to cover the construction costs and it has become established.
But I believe food industry market mechanisms and competition works pretty well in the US, so there's not much room for new big players. What did Tesco want to offer that Americans did not have? They should expand to smaller countries which have only a couple of large supermarket chains and an oligopoly.
Maybe this Finnish supermarket chain would have chances in the US?
No surprise, hell M&S couldn't even make in Germany, but hopefully Tesco failed because people don't like bagging their own purchases, super markets already make enough money they can afford some teenagers or part time pensioners, tired of these types of business that try every which way to remove jobs.
Maybe this Finnish supermarket chain would have chances in the US?
Spoiler:
In the South, you never know.
Quote:
Originally Posted by Rikupsoni
What did Tesco want to offer that Americans did not have?
Tesco, with Fresh & Easy, was trying to offer something that was between a grocery store and convenience store, a one stop shop for basic needs, I guess. To be honest, we don't really have anything like it, that I know of. But, I'm also not sure that isn't for a reason.
Quote:
Originally Posted by Mihail
No surprise, hell M&S couldn't even make in Germany, but hopefully Tesco failed because people don't like bagging their own purchases, super markets already make enough money they can afford some teenagers or part time pensioners, tired of these types of business that try every which way to remove jobs.
Yeah, I'm not really sure why they never caught on. Most people I talk to, who have even been to one, didn't really understand what the store was trying to be and seemed unsatisfied with the selection, they expected it to be more of a grocery store than it was.
Last edited by Red Menace; December 9th, 2012 at 05:46 PM.
No surprise, hell M&S couldn't even make in Germany, but hopefully Tesco failed because people don't like bagging their own purchases, super markets already make enough money they can afford some teenagers or part time pensioners, tired of these types of business that try every which way to remove jobs.
Funny you mention this because Aldi's does the exact same thing in the US and it works. There are 2 within 10 miles of me, and they do well versus the local grocery chains like giant eagle. They keep their prices very competitive which helps.
Quote:
Tesco, with Fresh & Easy, was trying to offer something that was between a grocery store and convenience store, a one stop shop for basic needs, I guess. To be honest, we don't really have anything like it, that I know of. But, I'm also not sure that isn't for a reason.
The big local grocery store, giant eagle, is trying a similar concept. Their upscale/organic/to-go grocery store model, market district, is working better in my area though.
Tesco in the UK range from "large" supermarkets (Tesco Extra) to small stores (Tesco express) but, our definition of large is not the same as the US definition.
Our supermarkets use a combination of self-checkout and traditional cashiers, but you can use chip-and-pin (card payment) at either.
When I worked for Tesco, they were always harping on about how successful their Fresh & Easy stores were in company newsletters, so I did a little research - and I knew this was going to happen.
I understand entirely why they didn't want to enter the US market with their traditional supermarket plan (which they do in every other country they enter, incidentally), but what I don't understand is why they chose the format they did, nor that ridiculous name. The project was doomed to failure, as far as I could tell. And here we go.
Quote:
Originally Posted by Red Menace
For our friends across the pond in the UK, what is Tesco like there? Is it self-service "Chip and PIN" (the term they used on Sherlock, I'm trying to get on your level here) like it is here? Do they offer their own brands? How is the quality of the merchandise? What is the grocery competition like in the UK?
Tesco in the UK is as large and prolific as Wal-Mart in the US. Their largest stores are roughly the same size as Wal-Mart Supercenters (185,000+ square feet), and they sell everything from food and clothing to electrical goods and garden furniture. Because stores over 150,000 square feet won't fit in little neighbourhoods or inner cities, and because they simply must have a Tesco sign on every street, they also operate smaller 'convenience stores' branded Tesco Express, which just sell the bare essentials. And there is every size inbetween.
The quality of the merchandise varies as much as it does in your own supermarkets. They have various own-brand products:
- Tesco Value is a range of cheap and nasty stuff for customers with a budget, not dignity.
- Tesco Finest is a range that largely matches the third-party brands in quality, depending on who you ask.
- Technika is Tesco's electrical brand, and it's prolific - from large-screen 3D TVs and surround sound systems, all the way to tablet computers and digital cameras. People who don't care about the quality of their electrical goods buy Technika products because of their shockingly low price tags. Tesco claim it to be the fastest-growing electrical brand in the UK.
- F&F is their 'designer' clothing range. People who are fine with being laughed at in the streets will buy this cheap range of clothing.
They also sell car insurance, credit cards, travel insurance, have their own mobile phone network, and they recently acquired an online movie streaming service to try and compete with the likes of LoveFilm and Netflix.
But their stores, primarily, stock third-party branded products. Heinz, Kelloggs, etc.
As for service, manned checkouts are the primary means of paying for your stuff. Y'know, dude sat at a till, with a conveyor belt in front of him.
Though in the UK we mostly prefer to bag up our own shopping, so the concept of dedicated 'baggers' is largely alien to us. Till operators will bag up your shopping for you if you ask, or if they are in a good enough mood to offer.
Self-scan checkouts do exist in most stores, but they are in the minority - there are only six self-scan checkouts in my local Extra store, compared to fifteen million manned checkouts.
Incidentally, I don't know how it works in the US, but in the UK the term 'chip and PIN' refers to the fact that we no longer sign for things when paying by card. All checkouts - manned or otherwise - have a chip and PIN machine so that you can enter your PIN code to authorise a card payment instead of signing a slip. Tesco seem to have appropriated that term to refer to self-scan checkouts in the US.
In terms of competition, Tesco is the largest supermarket brand in the UK, with something like a third of the market in their pocket. That probably doesn't sound like much, but they are either the second or third largest retailer on the planet (I can't remember). They compete primarily against Asda these days - who are owned, incidentally, by Wal-Mart. Then there is Sainsburys', Morissons, and Co-Operative Food, in that order I believe. There is a 'snob store' called Waitrose, which aims at being classier and, therefore, more expensive.
Tesco is so ubiquitous in the UK that it threatens the entire world and must be stopped:
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Tesco may leave US after only 5 years 
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