LOS ANGELES -- British grocery giant Tesco plans to take over a shuttered Albertsons market in Los Angeles' Glassell Park, an indication that it intends to build bigger stores than first expected, according to the Los Angeles Times.
The 32,500-sq.-ft. location will be among the first of a group that the world's third-largest retailer will open on the West Coast next year. It is a strategy of developing local scale. They want to build enough market share to matter, Darrell Rigby, who heads the global retail practice of consultant Bain & Co., Boston, [image-nocss] told the newspaper.
Tesco said this month that it would invest about $470 million to enter the West Coast with a new formatdesigned for the American market.
Tesco is expected to open about 150 stores in Southern California and the Las Vegas and Phoenix areas. It has set up its U.S. headquarters in El Segundo, Calif., and has purchased an 88.4-acre site along Interstate 215 south of Riverside for a distribution center to service those regions, according to the newspaper.
Tesco would not discuss its plans for the Glassell Park store, which is about double the size of what retail analysts previously expected. The company has said that its U.S. stores would be based on its Express format in Britain, suggesting to analysts that they would be about the size of a typical Trader Joe's grocery store. Like that chain, Tesco Express sells fresh produce, meat, packaged goods, prepared foods, wine and other beverages.
Whatever formats it launches, Tesco said it was using extensive consumer research to tailor the stores to American tastes, including building a mock-up inside an unidentified warehouse in the region. We use a mock store to look at product mix, to take focus groups in to look around and to see what is appreciated by them and how customers react, said David Cox, a Tesco spokesperson in England.
Citing the intensely competitive nature of Southern California's supermarket business, Cox declined to provide other details about Tesco's plans; however, a person familiar with the company's plans said Tesco was working on what it calls a Fresh & Easy concept and could call its U.S. stores by that name. Those outlets will be designed for customers who want to run in and grab just a bag of groceriesenough to make dinner that evening or fill a gap in their meal menurather than make a full-scale shopping expedition. The bigger stores will have a greater selection that approximates what other grocers sell. All of the stores are expected to do a brisk business in prepared foods.
Other reports said Tesco is actively seeking out buildings in the range of 14,000 square feet with an immediate trade population of 15,000 people and parking spaces for at least 70 cars. Thus, the biggest question for competitors is how many Tesco formats will show up here, Rigby told the LA Times. The size of the Glassell Park lease indicates that the British retailer most likely has a multifaceted approach to capturing a slice of the U.S. market, he said.
With a consolidation continuing among the major supermarket chains, Tesco should have no problem finding store sites, said Matthew Heslin, whose Newport Beach-based Heslin Holdings Inc. owns the Glassell Park building with Retail Holdings of San Diego. There seems to be a continuous supply of these types of sites as stores close, Heslin told the paper.
Both Albertsons Inc. and Kroger Co.'s Ralphs chain have closed supermarkets in the Glassell Park neighborhood, leaving the community with one independent grocer and a smattering of small convenience stores.
This has forced us to shop outside of our local area, said George Brauckman, president of the Glassell Park Improvement Association. If Tesco is clean and has fresh food and produce, it will do very well, he said. People will like the idea that Glassell Park is the location for this new venture.
Meanwhile, Tesco officials recognize there are challenges to entering the United States. The U.S. is a very mature market, Tesco finance director Andrew Higginson told an investor conference in New York this month, according to a Reuters report. It's very competitive. But it is a market where you can get on if you do find a format or form that works. You can have many years of organic growth here.
Jill Cashen, a spokesperson for the United Food & Commercial Workers union, said her group was hoping for a good relationship with Tesco because many of its British workers are union members. The West Coast cities that Tesco is targeting were strong union communities, said Cashen, whose union represents employees at many grocery stores.
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