What is in this article?:
- Tesco Looks for U.S. Exit
- 'Not Entirely Unexpected'
“I’s likely the review will lead to Tesco exiting the U.S. market."
— Philip Clarke, CEO, Tesco
'Not Entirely Unexpected'
David Gray, a research analyst at Planet Retail, London, said the strategic review was “not entirely unexpected, considering the company’s earlier announcement to restrict capital investment in [Fresh & Easy].”
According to one observer quoted in the Financial Times of London, “For a business that accounted for just 1% of Tesco’s sales in the first half of the year, it attracted a disproportionate amount of attention.”
One observer said Clarke “should have wrung Fresh & Easy’s neck long ago.”
A spokesman for Fresh & Easy, El Segundo, Calif., told SN last week, “Our focus remains on our people and our customers. It is business as usual in our stores, and we look forward to bringing our neighbors the same delicious, wholesome and affordable food they have come to expect from Fresh & Easy.”
When Tesco initially announced plans in 2006 to enter the U.S. market the following year, “the global economy was flying, and not even the brightest economists in the world could foresee the unprecedented crisis about to engulf the world,” Clarke said in comments on the chain’s website.
“But when it hit, it hit hard, and those states in the U.S. where we were trying to build a presence — California, Nevada and Arizona — were particularly affected by the sub-prime crisis.”
The United Food and Commercial Workers Union, which has sought to organize Fresh & Easy workers since 2007, issued a statement last week in which it said Tesco’s decision “forces thousands of Fresh & Easy workers to face a holiday season filled with uncertainty and fear if their jobs and stores will still be there in the new year.”
Tesco entered the U.S. with what it felt was a unique format — stores of 10,000 square feet with only about 3,500 SKUs, including a wide assortment of fresh items designed to appeal to the demand among West Coast consumers.
The stores never managed to meet Tesco’s expectations, however, with sales per square foot per week of $10.86 in February 2012, according to one industry analyst — only slightly more than half Tesco’s original goal of $20.
Read more: Fresh & Easy Future Questioned
Other mistakes, observers said, included the following:
• Promoting premium grocery products in a low-cost, no-frills environment — a decision that confused American shoppers; Fresh & Easy eventually added warmer colors.
• An intense pricing approach, which it altered to put more emphasis on the fresh and wholesome attributes of the product offering.
• A lack of in-store bakeries, which it subsequently added to about 30% of the stores.
• Too many health and beauty products, which subsequently had their numbers reduced.
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