It comes as no surprise to many retail watchers that British parent company Tesco announced this morning that it will attempt to sell all 200 Fresh & Easy stores, located in California, Arizona and Nevada. Incredibly, the chain did not make any money during its 5-year duration in the US.
It’s an unfortunate situation for the small-format, innovative stores that launched in 2007 with high hopes for bringing fresh food to “food deserts,” or areas that were underserved by supermarket and grocery store chains. Initial plans were to launch 1,000 stores in California & other western states before expanding east. Those plans were scaled down due to the economic climate as well as lack of performance & profit.
Why did Fresh & Easy fail? Theories abound. Primarily, the US grocery market is competitive, with well-established banners under Kroger, Safeway, and SuperValu brands.There’s also increased competition from high-end/specialty/independent grocery chains like Whole Foods and Trader Joe’s, as well as the rise of mass-market retailers with grocery components, notably Walmart and Target.
Fresh & Easy also pursued a self-service check-out model that was not popular with consumers who are used to cashiers, especially for high-volume, check-out intensive purchases. The chain also did not offer vouchers or coupons, which US grocery shoppers are accustomed to. In fact, many grocery chains highlight their coupon program as the primary draw for shoppers, even offering shopping incentives such as double coupons. Fresh & Easy also made a push to sell ready-made meals which were not necessarily compatible with local shoppers and their habits, mainly because shoppers in the west tend to grocery shop once a week and look for a wide range of products rather than shopping more frequently, where they’d be more inclined to shop for a grab-and-go/ready-made product.
Finally, Fresh & Easy launched with a high percentage of private label brands and a reduced SKU assortment in the center of the store. Many consumers were unable to find the brands they were used to purchasing, leading to frustration and an additional shopping trip. Many shoppers willing to give the new concept a try visited once and never returned.
Ultimately, the store failed to find it’s niche in the competitive US grocery landscape and solve a real need for consumers. It tried to introduce a new way of shopping that wasn’t compatible with US shopper needs, desires or patterns.
Retail analyst Neil Saunders of Conlumino in London said “Retail history will likely record Tesco’s American foray as something of an unfortunate misadventure.”