EL SEGUNDO, Calif. — Tesco has introduced promotional pricing on a handful of products at its Fresh & Easy Neighborhood Market here, in an effort to make its low-price message clearer to consumers.
“When we first started [opening U.S. stores last November], we didn't have any high-low promotions at all, because we were doing everyday low pricing,” Tim Mason, chief executive officer of Tesco USA, told the Financial Times of London. “And what we discovered, because we were the new kid on the block, was that people didn't get the price image. So this was the big move — to put [in] extra-low prices.”
Jim Hertel, managing partner at Willard Bishop Consulting, Barrington, Ill., said the move to a more promotional stance could help drive traffic at Fresh & Easy.
“Depending which items and how hot they end up promoting them, it could potentially generate some interest and some trial of the format,” he told SN last week.
“The whole concept is so unique and new to the American shopper that I don't think pricing alone is going to solve all of the education and communication needs that probably exist,” Hertel explained. “But what it can do is help get some people to try it that may not even be aware that it's there, or haven't established a pattern of shopping behavior there yet.”
Mason said in the Financial Times report that Fresh & Easy's new high-low price positioning, which includes two-week rotating promotions on about 30 items, will be a short-term program.
“We probably won't do it forever,” he said.
Fresh & Easy also plans to stress its price points more aggressively as it prepares to begin a new round of store openings July 2, Mason said. The company opened 61 stores in Southern California, Las Vegas and Phoenix its first few months of operation in the U.S. Plans include adding promotional displays featuring items with “extra-low prices” at the stores' entryways.
Reports also resurfaced that the chain, which is preparing to expand into Northern California by next year, could be eyeing further expansion in the U.S.
“We believe Tesco may head east, first to Chicago, then to the East Coast,” said Deborah Weinswig, an analyst with Citigroup, New York, in a conference call last week on the state of the food industry.
In describing the role of Jeff Adams, whom Tesco recently named co-executive vice president of operations for the U.S. business, Mason indicated that the company has expansion to new markets on its radar.
“We have always known we will need more executive vice presidents in operations, because this country is so big that as soon as we go into a new geography, we will need someone to run it, so we have brought him in a little early,” Mason told the Financial Times.
A Tesco spokesman told SN that Adams is expected to oversee the chain's move into Northern California next year; the Financial Times interview said Mason hinted that Adams could be deployed to another region — possibly Chicago — once the chain reaches crucial mass in the West.
Hertel of Willard Bishop said he expects Tesco to analyze who its best shoppers are in its current markets, and then eventually look for new markets that match those demographics.
“There's a fairly significant investment in distribution and commissary operations [involved in expansion], so I would think they would have used this three-month hiatus to start thinking about who the shoppers are that have proven to be the most devoted to the concept and increasing their acceptance, and then perhaps they will look for other places around the country where those shoppers would be found in abundance,” he said.
In addition to some changes in the decor and the addition of more private-label products, described in previous issues of SN, Fresh & Easy also is adding bigger shopping carts, Mason told the Financial Times.
“If you have dinky little carts, they think you are a dinky little business,” he said. “Full carts are a sign of a full shop. When they do come in to do a big basket, it doesn't work having small carts.”
Mason also said he has no second thoughts about selling produce that's packaged rather than in bulk. “Packaging has gone extremely well. Clearly, when we opened, we were very worried, but the very strong feedback is that [packaging] is hygienic.”
Regarding attitudes of Hispanic shoppers to packaged produce, Mason said that after talking with and observing such customers, “they really, really spot the freshness of the [produce]. And you need to be careful about making mass generalizations about 50% of the California population. It depends on how long they have been here, where they came from originally.”