LOS ANGELES -- A year ago, when British retailer Tesco was planning its foray into the U.S. market, the company dispatched an advance team of senior managers stateside. Hoping to keep their plans secret from rivals, the Tesco executives posed as Hollywood film producers making a movie about supermarkets, reported BusinessWeek.
The operatives set up a trial convenience store in a West Coast warehouse. Loath to leave a paper trail that could tip off competitors, they used plastic bags of cash rather than corporate charge cards to buy goods for their mock [image-nocss] store, said the report.
The result was a huge surprise for the U.S. retail industry. As reported in CSP Daily News, on February 9, Tesco CEO Sir Terry P. Leahy announced that the world's No.5 retailer will spend $453 million to open a chain of c-stores on the West Coast next year.
European chains have long tried, mostly unsuccessfully, to make inroads into the United States, the magazine said. Meanwhile, many U.S. retailers, squeezed by rising costs and big-box players such as Wal-Mart, are scaling back or selling out. Operating a U.S. store these days is not for the fainthearted, BusinessWeek said.
Tesco will be starting from scratch, with no brand recognition, no customers, and no distribution system in place, said the report. "Going from zero to a well-known brand in any country takes a long time, but in the U.S. it will take a lot longer," Jonathan Pritchard, food retail analyst at Oriel Securities, London, told the magazine.
Yet Tesco is a powerhouse in Britain, where it has blunted Wal-Mart's drive to dominate the retail scene, the report said. Wal-Mart's superstore format has been outflanked there by a swarm of Tesco stores of all sizes. It now controls more than 30% of the grocery market in Britain, a fact that has led Wal-Mart, which operates under the name of ASDA Group in Britain, to call for a government investigation.
Tesco will model its California outlets on its successful Express stores, a chain of 800 mini-supermarkets. The company, which operates some Express stores with Exxon Mobil Corp., plans to go beyond the traditional c-store format of fuel, snacks and cigarettes to include groceries, produce and private-label ready-to-eat meals.
Is Tesco itching to mix it up with Wal-Mart on the American retailer's home turf, asked BusinessWeek? The British actually are targeting an area where Wal-Marts are relatively scarce, it said. The Bentonville, Ark., company has only 266 stores in California, Oregon and Washington. Wal-Mart is experimenting with its smaller-format Neighborhood Markets, but these are more like supermarkets than c-stores.
"To grow, Wal-Mart needs to go beyond big stores," Frank Badillo, director of global research and senior economist at consultancy Retail Forward in Columbus, Ohio, told the magazine. "Tesco is beating them to the punch."
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