STORES Magazine - April 2008 - (Page 40)

EXECUTIVE SUITE / GROCERY Quality vs. variety Shoppers also gave Fresh & Easy solid marks for meat and produce — even giving it an advantage over other food stores, according to the SIRS survey. “This was surprising since they have quality but not variety,” Ohlinger says. “They also received credit for the quality of their take-out heat-and-serve products, even though there wasn’t a large selection.” One of Fresh & Easy’s weaknesses is inconvenient store hours (8 a.m. to 9 p.m.), which don’t fit the lifestyles of people in the area. “Think of it this way,” Ohlinger says. “McDonald’s sells more salads between 6 a.m. and 8 a.m. than at any time during the day; people pick it up on their way to work. So if you’re not open until 8:00 a.m., it can hurt.” Consumers also weren’t enamored with the store’s HBC presentation, a limited selection of both national brands and private label. Another perceived weakness is the modest size of “Think about the evolution of club stores and supercenters,” he says. “They segmented people based on who wanted onestop shopping and low prices. When Whole Foods came out, it segmented out consumers who wanted a healthier lifestyle. “Fresh & Easy is more of a situational segmentation for people who are on the go,” Ohlinger says. “They don’t need to make a long stop at the food store but they do have needs for that night or for the office — the need to pick up good quality food in a hurry. It transcends demographics since all groups seem to like the store.” The concept, Ohlinger says, is “positioned well, but vulnerable. Store hours are relatively short, they are missing the health and beauty aids connection and their price reputation is not very well communicated or well perceived by customers. If they lose their perishables position, they could be in real trouble.” Shoppers gave Fresh & Easy solid marks for meat and produce — even giving it an advantage over other food stores the produce and meat departments. While official sales data for the stores was not expected to be released until later this month — and most analysts feel it would be prudent to wait until April 2009 before rendering judgment — some industry observers are already weighing in. Piper Jaffray analyst Mike Dennis was quoted in London’s Evening Standard as saying that, with average weekly sales of $170,000, the stores are falling short of Tesco’s target of $200,000 and that the concept needs to be reset. “The overall indication seems to be negative,” Dennis says. “This begs the question of how bad it could be for Fresh & Easy stores across California, Arizona, Nevada and what it would mean to Tesco’s long-term growth and international strategy in the U.S.” A Tesco spokesman responded that it was “ridiculous” to make judgments so soon after the first store opened, a point that Ohlinger concedes. “If consumer acceptance holds up, there’s a good chance that they may be redefining food shopping not based on demographics but on situational targeting,” he says. 40 STORES / APRIL 2008 Awareness may still be an issue, he says. “A lot of people in the trade area still didn’t know they existed and any new concept can take several years before it is well accepted and makes money.” Borrowing from Wal-Mart? Tesco may be borrowing a development strategy straight out of Wal-Mart’s Supercenter playbook. “Wal-Mart opened several [Supercenters] then learned how to operate them properly,” Ohlinger says. “I think that’s what we’re seeing with Tesco. Their first entries are not going to be their best entries, but they are tapping into a legitimate market and changing how people shop. It just takes people a while to learn how to change their shopping patterns.” Are retail executives now starting to change their mind about Tesco’s concept? “We haven’t asked them yet,” Ohlinger says, “but I suspect not because they can’t measure the effect of one Fresh & Easy on one of their stores much like you couldn’t measure the effect of one McDonald’s restaurant opening next StORES to your supermarket 40 years ago.” WWW.STORES.ORG http://WWW.STORES.ORG

Table of Contents Feed for the Digital Edition of STORES Magazine - April 2008

STORES Magazine - April 2008 Contents Executive Editor's Page President's Page More Retailers Bagging Monthly Comp-Store Reports Time-Warner Center's Economy-Defying Results What Shoppers Think 10 Things You May Have Missed Numbers Worth Counting Full Price/Markdown Retail People Eating Locally Grocery Concept2Watch Restaurants Online Services Marketing Human Resources Product Lifecycle Management E-Commerce: Peer Reviews Drive Online Buyers Kiosks Recycling Operations Payment Systems POS Logistics E-Commerce: Getting Personal Website Management LOEB Retail Letter Arts Update Point of View NRF News Retail Industry Calendar Last Laugh

STORES Magazine - April 2008

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