LONDON -- Tesco PLC, which is currently building the infrastructure for the debut of its Fresh & Easy convenience store format on the U.S West Coast, is certainly not the first British retailer to launch a U.S. offering. But it remains to be seen whether it is a student of history, because America has proven hostile territory for British retailers in the past.
In 2003, U.K. grocer J Sainsbury PLC exited the U.S. market by unloading the Shaw's chain of supermarkets in New England on Albertsons. And in March, British clothing retailer Marks & Spencer [image-nocss] PLC cashed in its chips with the sale of Kings Super Markets Inc. in New Jersey to an investor group. In both instances, British knowledge of supply-chain logistics and food retailing didn't translate into American dollars. [To read more about Tesco's U.S. plans, watch for the July issue of CSP magazine.]
The Marks & Spencer effort in particular was noteworthy for its high aspirations and ultimate failure. Kings Super Marketswere really high-quality small supermarkets, says Gerald Lewis, a retail consultant and CSP columnist who consulted for family-owned Marks & Spencer. They were absolutely dedicated to food, food preparation, and had the most elaborate food produce warehouse I'd ever been in.
In 1988, Marks & Spencer bought the 16-store Kings chain for $108 million. At the time, that was a lot of money, but it was an investment the retailer was willing to make so it could test its famous cold-chain distribution and prepared meals in the United States, Lewis said.
After a 20-year struggle, Marks & Spencer gave up. The problem, Lewis contends, had to do with a failure in marketing the ready-made meals to U.S. consumers. They tried to convince customers that the stuff in the box that looked like frozen peas was actually wonderful-quality prepared food, prepared that day and delivered by cold chain, he said. But they could never get the public to accept it, and they failed.
Lewis says the same situation happened with Sainsbury's foray with Shaw's. Again, they thought their English food expertise would translate into this country, and they found it's an entirely different market, he said.
According to Lou Cooperhouse, director of the Rutgers Food Innovation Center at Rutgers University, Martinsville, N.J., and someone familiar with the Kings effort, Marks & Spencer simply did not have the scale required to make cold-chain distribution economically worthwhile. In the case of Kings, they only had about 18 to 20 stores at the time, he said. They just didn't have critical mass. A lot of needs have to be metenough volume, enough geography, so they just didn't have enough throughput to really make it economical.
What are Tesco's chances of successfully transferring its British-born supply-chain discipline to the United States? That is the critical question, said Cooperhouse. Everyone wants to start small with a pilot test, but in order to do that, they just need to realize that success will come when you have enough critical mass of throughput, so you have to grit your teeth until you get to that point and accept your losses. The key is to try to offer quality that actually will sell and that consumers want, and just keep at it until you get the critical mass.
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