Tesco to quit US
Wind back to November 2007 and the roots of Fresh & Easy's failure were already visible. Tesco was herding City analysts and journalists around Los Angeles to showcase its new US operation and the local chains that it hoped to vanquish.
The coach stopped at Trader Joe's, the grocery chain, where Tesco's then US chief, Tim Mason, lectured one of his rival's employees on the correct way to handle a stock trolley.
Five years later, he would quit Fresh & Easy amid severe losses and Trader Joe's would be in the running to scoop up some of its stores. Maybe Tesco should have focused on what its competitor was doing right.
Trader Joe's, owned by the German supermarket giant Aldi Nord, has about 370 stores in the US and sells an estimated $1,750 (£1,140) in merchandise per square foot. The sales per square foot achieved by Fresh & Easy during its opening months was a mere $11 to $25.
Both businesses are owned by European retail giants, so why did only one win the West?
Like Fresh & Easy's 200 US stores, Trader Joe's strives to sell wholesome food at a low cost. The key difference between the two lies in Trader Joe's focus on customer experience – the cheery staff wear Hawaiian shirts, morning shoppers get free coffee and kids get rolls of stickers. Over at Fresh & Easy, customers fend for themselves at self-service checkouts.
Trader Joe's follows its parent group's business model of focusing on a narrow selection of own-brand products which are cheap to produce and market, resulting in high profit margins.
Fresh & Easy also relies heavily on own-brand products. However, according to Burt P Flickinger III, managing director of the US retail consultancy Strategic Resource Group, it failed to replicate Trader Joe's buzz in its design and customer communication.
"Trader Joe's had 55 years to build up an incredibly strong following with shoppers. It could do more sales per square foot than Fresh & Easy because it had such a strong marketing programme. Fresh & Easy failed to understand how to market," he said.
When it publishes its annual results on Wednesday, Tesco is set to draw a line under those errors by announcing the end of Fresh & Easy. The postmortem of the venture continues to produce competing reasons for its failure: from poor locations, pre-packaged fruit and restrictive rents to the 2008 financial crash.
Source: guardian.co.uk
