What better testing ground for new concept gourmet mini-supermarkets than Southern California? That’s what British supermarket giant Tesco thought, too. Fortune Magazine reporters Matthew Boyle and Michael V. Copeland recently wrote about this new phenomenon in an article that appeared on CNNMoney.
“Tesco reinvents the 7- Eleven” documents the launch of convenience stores that aren’t selling beer and snacks as the mainstay of their business. Nor are they offering overheated, stale coffee and hot dogs. Rather, these Fresh & Easy mini supermarkets are popping up in Southern California and the Southwest as a counterpoint to, and competitor to Whole Foods, Trader Joe’s, Costco and Mexico’s Gigante.
The stores are stocked with mouth-watering, prepared ethnic foods, fresh produce and exotic offerings. Tesco thinks there’s a niche for this kind of smaller gourmet mini-market.
Tesco CEO Sir Terry Leahy: “We think Tesco has found a gap in the market, but is there a market in the gap?” Insightful comment since a new venture like this is a gamble. Yet, Tesco obviously isn’t squeamish about entering one of the United States’s most competitive marketplaces for food or any other consumer products.
Does anybody remember Wal-Mart’s smaller footprint Neighborhood Markets, featuring lower prices and more narrow offerings than could be found in its Supercenters? That was a failure, and Tesco’s new retail concept might fail also.
Time will tell. Still, some food industry analysts are bullish on the idea and think that Tesco could conceivably have more than 1000 Fresh & Easys over the next five years.
FYI: Tesco’s new Fresh & Easy markets officially debuted with Grand Openings in Southern California last week to long lines and rave reviews. After the newness and curiosity subside, can this new format in food shopping be sustained?
Questions:
* What do you think of Tesco’s idea of opening mini gourmet supermarkets?
* Do you think they will do well? Or do you think mini supermarkets ought to offer more basic grocery items?
* Would you be tempted to try the prepared meals in a Fresh & Easy or think to order take-out from your favorite Chinese, Thai or Mexican restaurant instead?
* Lastly, do you think a British grocery giant has a better chance of launching a successful new food market format than its American counterparts?
I’d love to get your thoughts.
Ted,
The “Fresh & Easy” concept could be successful if they stick to their core offering of gourmet offerings for quick prep meals. I’m afraid that if they expand (both in terms of store footprint as well as stocking “basics”), they’re doomed to fail as they would then have to compete head-on with Wal-mart and major supermarkets on price vs. their unique and superior food offerings.
They’ve got a great concept – and it looks like they’re positioning it as a fun shopping concept as well. If it proves to be both fun and fresh, they’ll get trial… and repeat.
And, from a personal perspective, I’d love to try them out if they expand beyond the West Coast. Really Cool Foods has a similar concept here in New York but they have only opened 1 location thus far.
AnnaMaria,
Tesco has tremendous resources and they have a shot at making this work. The curious thing, though, is that they are British food retailers and it will be interesting to see whether they can create a niche market here in the U.S. Early indications are good, but we all know that many shoppers will turn out to try something new. What we need to observe is whether or not repeat business will be strong.
The concept, as you point out, is a good one. The timing looks right to launch smaller markets offering fresh foods and prepared meals that are healthier and cater to a growing taste (pardon the pun) for gourmet foods. Thanks weighing in, AnnaMaria.
Ted,
Here’s my concern for Tesco: I believe they face a marketing barrier built by the impression created over decades by what a mini-mart is. And what is that perception (brand image)? A convenient place to purchase a few items and a willingness to pay a slightly higher price for those items in exchange for the convenience.
How will Tesco get us to think of a mini-mart as a place not meant for convenience at higher prices but for gourmet foods at competitive prices?
You’ve hit on a very important point, Lewis. We all have a certain image imprinted in our brains about what mini marts look and feel like. Not having seen the Fresh & Easys, though, I’m betting that these markets have a totally different look and feel than 7-Elevens and the like. Even before customers walk into these stores, there must be clean, contemporary, more upscale design to the locations. And that would raise the level of expectation. Then the inside of the stores and their merchandising would have to deliver on the expectation created by first impressions. That would necessarily lead customers to expect to pay more, but get more in the way of quality, freshness and more sophisticated choices. Tesco would have researched this thoroughly before launching any new niche market. That’s what I’m surmising.
I’d love to hear from Southern Californians who have a new Fresh & Easy in their area to get their input on the issue you’ve raised, Lewis. It’s an important one. Thanks for adding much to this discussion.
Hi Ted, I read an article somewhere – wish I could source it – that said ~60% of on the shelf items at Tesco were private label, a la Trader Joes. With unique items, gourmet foods, and smaller and perhaps “quaint” format, I believe they have a chance -even in competitive Southern CA.
Hi Paul,
Right on cue. Since you live in Southern California, I was wondering whether you, or someone you know, might have shopped at one of the new Fresh & Easys yet. It would be great to get insights from people who have actually visited one of these stores.
Interesting information about the shelf grocery mix being represented heavily by a Fresh & Easy private label brand. PL is generally quite profitable and could help build the entire chain’s image, along with its prepared foods and fresh produce, of course.
Thanks for the info, Paul.
Interesting that Tesco is targeting southern Cal., which already is thick with Trader Joe’s stores. The east coast, on the other hand, isn’t.
It seems Fresh & Easy is similar to Wegman’s. http://www.wegmans.com/
Anyone know?
Ann,
From what I’ve read, I believe that Fresh & Easy is more like Trader Joe’s, even though TJ doesn’t offer prepared meals in a big way. Wegman’s has a presence here in NJ, and we shop there frequently. Wegman’s is a true supermarket, but it happens to specialize in basic grocery, plus gourmet and natural/organic offerings as well. Wegman’s is also a cut above most, if not all supermarket chains due to the stellar customer service they are noted for. As a consumer, I love to be able to say this.
The footprint of the new Fresh & Easys is much smaller and their offerings highly specialized and much more limited. The model is very different. It seems as though the new Fresh & Easy concept might be borrowing the best from all of the other store models that have been cited so far. Thanks for posing an excellent question, Ann.
Ted,
If marketed correctly, this new niche concept in food retailing could really take off. If managed well, minimizing thow-aways on perishables and other normally occurring retail losses, these kinds of operations can and should be more profitable than traditional supermarkets.
It will be interesting to see whether the Fresh & Easy format takes off. And that might take some time. If it does, though, it might make a good model for large urban environments where rents are dear and the costs of retail operations very high. Whole Foods and Trader Joe’s are moving into cities in spite of this, and flourishing. Urbanites love having access to a mix of natural, organic and gourmet products. . .not to mention great prepared meals to go. I see great potential here. Of course in NYC, they’d get numerous phone calls with the usual question: “Do you deliver”?
I find it fascinating, as a UK reader, that Tesco are pushing this line as “gourmet” – this sort of food has been standard fare in our supermarkets for years…
This sort of concept first took off over here, however, in city locations – convenience became paramount, while exotic/foreign foods were familiar amongst city dwellers due to the mixed ethnicity common to our cities.
It’ll be interesting to see if Tesco target the same sort of segment in the States.
Good points, Claire. This new, lean format with a very specific mix can be the right kind of market for urban markets.
Anne, thanks for adding the perspective of a UK consumer who is familiar with Tesco. You’ve corroborated Claire’s speculation that the smaller Fresh & Easy format might thrive within large urban settings.
Tesco has been interested in either purchasing existing grocery chains in the U.S. or launching its own stores for some time now. I think they might have hit on a good formula here. We’ll have to wait and see how the Fresh & Easy concept performs in saturated retail environments.
Thanks for adding your perspectives, Claire and Anne. I appreciate it.
A Fresh & Easy store is scheduled to open two blocks from my home, so I can let you know my initial thoughts once I have a chance to see it. In the meantime, the concept isn’t new to North America. With Trader Joe’s, Whole Foods and Sprout’s, there is ample competition. A lot will have to do with location, convenience and pricing.
What amazes me is that chain supermarkets haven’t figured out that their prepared food offerings could be an excellent revenue generator if only they upgraded the quality. Of course, I haven’t seen any research on this, but it seems to me that their prepared foods are lackluster, unhealthy and high fat. If they offered quality, healthier options, it would be more convenient to purchase them while I shop for my groceries.
Hi Elaine,
That’s great. I’d love to get a report from you once your local store opens.
While the Fresh & Easy concept is similar to WF and Trader Joe’s, there are differences. Most WF stores are larger with full complements of grocery, frozen foods, perishables, personal care and supplements. Fresh & Easy definitely isn’t like that. Trader Joe’s is probably a closer fit as cited before. Not sure what Sprouts is all about, because I’m not familiar with them.
You’re right in what you said, Elaine. Supermarkets are offering more convenience foods all of the time. It’s too bad they haven’t gotten into higher quality, more gourmet oriented offerings since that’s where consumer interest and growth potential seem to be.
Thanks for your input, Elaine. I appreciate it.
Interesting conversation, all. You might want to take a look at this article from the December Natural Business News Levine Report for insights into the positioning of Fresh & Easy and its potential impact on Whole Foods and Trader Joe’s. Hot off the presses:
http://www.naturalbusinessnews.com/levineReport.php?NYSKID=220&dateS=2007-04-19
Wow, this is interesting to stuff to read. As commenters have been saying, there are elements of the Whole Foods format and the Trader Joe’s format being emulated in the new Fresh & Easys. . .yet, this is entirely new niche format. Yet, these food retailers have taken notice and are a bit nervous about this new entry into the marketplace. As Anne pointed out, too, Tesco’s Express stores have been successful in the UK, so here goes. . .
Thanks for the link to the online newsletter, Claire. I think Daily Fix readers will appreciate getting this perspective.
Lively discussion here.
This morning I had an online conversation with Jon Plummer after reading his post about Fresh & Easy fumbling the ball with a store opening in his neighborhood: http://jonplummer.com/archives/185
Apparently, not all the stores opened to rave reviews. I couldn’t resist having my say:
http://responsiblemarketing.com//blog/?p=24
I’m rooting for Fresh & Easy. Competition will only make Trader Joe’s and Whole Foods better.
It feels like the right idea coming from the wrong people. Tesco would have trouble convincing me they are not just giving me a shiny version of what I could get in a supermarket.
If I want to have high end gourmet food and I have the means, why wouldn’t I go to an exclusive boutique? Now if an exclusive boutique started opening a little more democratically this could create a buzz and have all the elements to open the niche.
Patrick,
Thanks for the links. I expect the early reviews on the new Fresh & Easys will probably be a mixed bag of good and bad. Only time will tell as to whether this new venture will be successful for Tesco, or not.
“I’m rooting for Fresh & Easy. Competition will only make Trader Joe’s and Whole Foods better.” Well put, Patrick. I second those sentiments. Thanks for weighing in.
Timothy,
Your skepticism is understandable. That’s why, in marketing circles, the customer experience has to match the expectation built by a portrayed image. If Fresh & Easy delivers consistently to consumers, giving them what they expect and what they are looking for, then the model will be a winner. If not, it won’t fly. Question is: do most supermarkets deliver gourmet, high quality prepared meals? I think the answer is “no” to that question generally speaking, so Tesco has a real shot here. And, as Patrick pointed out, their entry into the marketplace ought to make the competition sharper. That’s always a win-win for consumers.
Thanks for adding your observations, Timothy. I appreciate it.
The curiosity raised between East coast and West coast, and to a certain extent, the UK, is totally understandable. The UK has long embraced healthier, fresh eating, and so does California. The East coast, on the other hand, thrives on convenience and fatty junk foods, quite deplorable. Consqeuently, Tesco is right to open in yuppyville.
I’m a UK expat, with 4 years in Texas then 7 years experience of Wegmans as my local supermarket in the Finger Lakes of NY, plus 6 months of weight gain this year in Manhattan. I thought Wegmans to be expensive compared to the UK, but at least fresh compared to other chains.
As a resident now of NC, the cost for fresh food in local supermarkets is outrageously expensive – and hardly ever fresh.
What the US calls gourmet food is “normal food” in Europe – and it doesn’t need to be expensive. There actually are other cuisines besides MacDonalds, Mexican and Chinese noodles …
Tesco will do well the more the health care costs continue to bite, and the quicker that the USA stops polluting for convenience and acknowledges global warming – it all goes hand in hand.