How Fresh & Easy Went Off Track in Slow Motion

Tesco’s decision this month to explore alternatives for troubled Fresh & Easy was the culmination of a remarkably long decline for a venture that, a few may recall, once frightened U.S. retailers.

For a short period of time some five or six years ago, retailers here worried about the British retailer’s impending plans to enter the American market.

They feared Tesco’s extensive resources and successful global track record.

However, by the time Tesco was about to deliver its first Fresh & Easy small-format stores onto U.S. soil in 2007, this sense of fear had already begun to dissipate.

It’s not that retailers expected Tesco’s invasion to fail, but rather they realized Fresh & Easy wasn’t going to be a killer competitor to supermarkets. As the thinking went, the British import would take a bit of share from each of a wide range of operators, including restaurants and convenience stores, but mortally wound no one.

As it turned out, even those reduced expectations were too lofty. By the spring of 2008 Tesco had opened some 60 units in California, Arizona and Nevada, but already it was clear things weren’t going according to plan as U.S. sales reportedly fell well below expectations.

Read more: Tesco Looks for U.S. Exit

From the start Tesco was challenged to find its footing, despite a systematic effort to carefully research the U.S. market. The reasons for the troubles are too long to list here. However, among the chief causes were a fast buildup and expansion, a product mix that didn’t resonate with consumers, launching without a loyalty card program, a focus on self-checkout, and bad timing due to the recession.

Rather than reversing course, Tesco, which had deep pockets, for years tweaked the format and expressed support for the initiative.

The inevitable finally came this month, as Tesco and its CEO Phillip Clarke decided enough was enough.

What will happen now? The company said all options are on the table, so this could lead to a sale, closure of the roughly 200 stores, or a partnership.  

Mostly, the Fresh & Easy saga is a cautionary tale about the dangers of expanding too quickly without a real understanding of the needs of a market. It’s also a reminder that even deep pockets eventually tear under the strain of ventures gone off track.

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