Sunday, May 18, 2008

A visit to Fresh & Easy

On a recent evening, while on assignment in Los Angeles, I went out with two of my colleagues, Andrew Wilson and Dhruthi Murthy, to visit one of Tesco's new Fresh & Easy stores.

The first conclusion to be drawn from this is that all three of us need to seriously examine our priorities if the best thing we can think of to do with a free evening is to check out new store formats.

The second is that Tesco has a lot of work to do.

I had heard that one of the problems Fresh & Easy has faced during its intro period is that Tesco was in such a hurry to get a lot of stores opened that they selected some poor locations. This seems to be confirmed by the fact that our client advised us not to visit the first location we mentioned, since we would be unlikely to survive to return to work the next day (the client. of course, was concerned that this might cause a missed deadline).

Our second choice, in Long Beach, was in a reasonably nice mid-level strip mall. The Fresh & Easy had apparently replaced a departed retailer, so maybe this wasn't indicative of their built-from-scratch locations, but we noted immediately the bare concrete floors. More important, though, were the bare shelves. The number of out-of-stocks was terrible and no one had taken the trouble to at least rearrange the shelves as a cover-up.

Most categories consisted entirely of private label products (a strategy Tesco apparently intends to expand, according to this item reporting that they will add 250 more PL products). This is good, although their choice of branded products didn't seem to follow any discernible pattern. They also had a habit of putting the same product in multiple parts of the store, which would make more sense, it seems, in a larger store. We saw three stack-outs as well as shelf space for a 24-pack of bottled water on promo. There were also strange juxtapositions, such as ice cream mixed in with frozen fish in the freezer section.

There are reports that shoppers are positive about Fresh & Easy. This report gives them overwhelmingly good reviews from customers.

The researchers found that customers who did visit Fresh & Easy liked what they saw. The chain was rated higher than Trader Joe's and Whole Foods on freshness of product, and it even managed to beat Wal-Mart on value for money.

Execution said that it expected shopper numbers - the stores they were monitoring had only 20-30 customers through the door every hour - to increase as the brand grew.

Nearly nine in 10 shoppers said they would "highly recommend" the stores to friends and family - the highest recommendation score in 200 brand evaluations undertaken by the team.

Needless to say, we weren't interviewed.

Part of the problem may be that Fresh & Easy is trying to create a new niche, a high end c-store with lots of fresh produce and prepared meals -- a mix of 7-11 and Trader Joes. It will take time to fully define the format that will do this right. Certainly a big part of the problem is that it's still very early in the life of this chain -- they need to be given time to develop. Given Tesco's track record, I'm not prepared to bet against them.

Neither, apparently, is Wal-Mart, which is planning to open very similar stores in Phoenix, going head-to-head in one of Fresh & easy's markets.
Wal-Mart Stores Inc intends to prepare and serve food in its planned small-format stores, the Financial Times said on Friday, as it competes with British retailer Tesco's Fresh & Easy markets.

The smaller-format stores will include a kitchen, food counters and seating for up to nine people, the FT said, citing planning documents.

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