Ahead of Fresh & Easy's launch in November 2007, Mason trumpeted the in-depth research that the company did to identify [image-nocss] a gap in the West Coast grocery market. Marketing director Simon Uwins said, "We went into people's houses, talked to them about food and food shopping. We went into their kitchens and poked round pantries."
Unfortunately, Mason now admits, they did not poke around their garages, where they would have found huge freezer chests bulging with stockpiled meat bought on special offer.
"There's less loyalty in the American market," said Mason. "A Brit has to hear it a few times before you accept that people make up their mind where to go each week when they check out the special offers round the kitchen table. In a key moment at a focus group, one man told them that he had stopped shopping at Fresh & Easy because they no longer sent him a flier promoting the latest special offers. We came out of that meeting and said we had better make sure we hit everyone in the area with fliers."
Recession has slowed expansion, said the report. There are 113 Fresh & Easy outlets now, and plans to have 200 locations have been put back at least six months.
In November, Mason told The Times that the "meltdown" in the U.S. economy was slowing Tesco's growth plans. Mason conceded that the chain had found it harder than expected to crack America, not only because of the more mature nature of the market-"we are not filling a vacuum"-but also because of the economic slowdown.
He added, "The industry is in a very different place than when we came out and did the feasibility research three years ago. Then, the U.S. consumer confidence index was at the highest level it had ever been. In October, the U.S. consumer confidence index was the lowest it has been since 1967, so it's a big change. We will still open stores every week, but it's prudent to slow things down a bit.... As things get to a point that we like how it's all coming together, we like the way the stores are growing into the second year, then we can accelerate. If the economy takes a turn for the worst, it would be unwise to accelerate."
London-based Tesco is spending $1.25 billion over five years trying to break into the United States. The move has been the subject of speculation since the first store opened near Los Angeles a year ago. The group still refuses to publish any financial information about Fresh & Easy's performance, and some analysts believe that sales have missed internal expectations.
Mason put the store opening program on hold in March for three months to evaluate what Fresh & Easy could do better, the report said. It has since put far more emphasis on price promotions to emphasize its claim to be 20% cheaper than traditional U.S. supermarkets.
El Segundo, Calif.-based Fresh & Easy has been unable to open some stores in Phoenix and Las Vegas because property developers decided to shelve plans for certain sites.
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