Jim Hertel, managing partner at Willard Bishop Consulting, Barrington, Ill., offered a mixed overview of Tesco's Fresh & Easy banner.
His company's research indicates customers are pleased with the Fresh & Easy experience, Hertel said. “Shoppers we talked to at the stores were very enthusiastic and said they've been coming back more frequently and building their basket size over time, which are very positive, hopeful signs.”
The stores are “spare but spacious,” Hertel added, “with polished concrete floors, exposed ceilings and aisles [that] are quite wide so carts can pass easily.
“Green and tan in-store signage with a ‘hand-drawn’ typeface communicates the limited-assortment policy, and use of LED lighting in freezers communicates in a Whole Foods-like tone of voice.”
However, Hertel said traffic in the stores he visited seemed light for the middle of an afternoon.
Of the two Phoenix stores visited — one in an upscale area, the other in a lower-middle-class ethnic neighborhood — “the assortments were closely matched, despite the obvious differences in demographics,” Hertel said.
Strong values were available storewide, he noted. However, while pricing of private brands at most conventional stores does not exceed the corresponding national brands, “Tesco takes a different approach,” he pointed out.
“Beer, salty snacks, non-alcoholic beverages and laundry detergents are dominated by national brands. Pasta sauces have only two national brands, represented by four SKUs, while the Fresh & Easy brand has over 75% of items and space, and is priced at a 45% premium compared to the national brand.
“Fresh & Easy Mac 'n Cheese is priced 14% above the brand, and in most fresh categories, only private-brand product is available.”
The stores also exhibited out-of-stock problems, Hertel said. “At least 20% of fresh items were completely sold out, with only one or two units of several other items left on the shelf.”
Although fresh items are delivered to the stores each day at 6 a.m., Hertel said he found out-of-stocks before 3 p.m. the day of his visit, “so [the stores] could potentially lose sales for several more hours,” he pointed out.
“Since ordering is totally computer-based, it's clear Tesco's demand forecasting models haven't yet captured local needs. And since unmet demand for out-of-stock product may not be fully accounted for, it could be a while before sufficient quantities are ordered.”