LOS ANGELES -- Tesco's Fresh & Easy chain represents a significant threat to U.S. food retailers, according to two research organizations.
Both the IGD and TNS Retail Forward have warned the UK operator should not be underestimated, with TNS forecasting Tesco could be a $4-billion retailer with 500 stores by 2011, according to a report on TalkingRetail.com.
TNS also believes sales could reach $10 billion by 2015, catapulting Fresh & Easy into the top 10 supermarkets in the country.
Both [image-nocss] analysts suggest Tesco will be successful as a result of its shopper focus and convenience proposition, the report states.
Ben Miller, international program manager for IGD, said, The Fresh & Easy format is intended to fill a gap in West Coast retail between small convenience stores and traditional supermarkets. What shoppers will find at Fresh & Easy is a store which is quicker and easier to shop than a traditional American supermarket, and contains a wider range of fresh produce than traditional convenience stores.
The U.S. market is the most mature Tesco has entered for some time, but Tesco sees an underdeveloped, potentially lucrative void, and the company has researched the opportunity in incredible detail. Retailers who underestimated this new arrival may come to regret it.
TNS, as previously reported in CSP Daily News, says Fresh & Easy's small-size advantage gives it the opportunity to almost double productivity per square foot, compared with supermarket industry averages. TNS predicts Fresh & Easy could generate sales of $900 per square foot per storetwice that of the supermarket average.
The combination of Fresh & Easy's smaller stores, self-service tills and ready-to-cook meals has direct appeal among U.S. shoppers whose primary concern is convenience, said Jennifer Halterman, senior consultant at TNS Retail Forward. There is demand for this type of concept, and we expect other U.S. retailers to be watching Tesco closely for ideas on how to tap into this buoyant market. Fresh & Easy's smaller store size gives it an ideal formula to replicate quickly throughout the United States.
Range will be a magnet for shoppers too, say the researchers. IGD says fresh produce and ready meals with an emphasis on private label will allow Tesco to standout in a crowded marketplace.
TNS agrees and says the biggest driver for Fresh & Easy is prepared foods.
The idea of having ready-to-go meals that are high quality, fresh, healthy and cost effective means that this type of meal option has the power to directly compete with restaurants, said Mary Brett Whitfield, senior vice president, TNS Retail Forward.
The Fresh & Easy branding, created by London-based Pemberton and Whitefoord (P&W), is distinct too. P&W designed the packaging for 600 grocery SKUs across 70 product groups including teas, coffee, ambient fruit juices, cereals and packet meals. U.S.-based Deutsch LA, meanwhile, developed packaging for the fresh and frozen lines.
The Fresh & Easy look is entirely different to that of Tesco in the UK, and at the same time, it stands out very clearly from the American category norms, said P&W partner Adrian Whitefoord. It's about fresh food, which is easier to shop and a healthier alternative to the norm. The shopping experience in the U.S. in terms of c-stores tends to be very [much the same]; they cram the stores with a lot of alternative brands. For example, they have in excess of 12 different tomato pasta sauces.
Whitefoord said the Tesco model, in contrast, lists the two best brands and a private-label alternative. It makes shopping the store much more pleasant and easier, he said.
Whitefoord said the early results were encouraging. It's going pretty well. It's going to be a slowish process because it's a whole new concept. It will take time for people to migrate from one store to another, but prices are on a level of Wal-Mart, so all in all it's pretty persuasive, he said. Tesco is in it for the long term. It will take time to ramp sales up but I believe it will get there.
For a first-hand look at Tesco's Fresh & Easy stores in California, watch for the January issue of CSP magazine.
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