The year-end announcement by Tesco of a stunning £3 billion gross profit from worldwide operations was soon followed by the announcement it is expanding it’s F&F fashion offer into the growth economies of the Middle East and Central Asia through franchise deals. They seem to have learnt from their disastrous foray into the USA with the Fresh & Easy store brand. Partnering with an established local retailer ensure stores reflect local preferences rather than imposing a ‘one-size-fits-all’ approach, as used for Fresh & Easy.
Knowing your customers and adapting your offer to suit is more important than ever if you’re selling into a non-European culture.
The Fresh & Easy format is much smaller than most American supermarkets and stores are located mainly in ‘blue collar’ neighbourhoods on the US West coast – California, Nevada and Arizona. When it was launched at the end of 2007 it planned to open up to 1,000 outlets based upon a projected break even of 2013. The site of their equally-ambitious distribution centre acquired in Southern California is bigger than Disneyland.
Fresh & Easy lost some £120 million last year and Tesco have mothballed many new openings.
But sales at the first 100 stores to open have been so poor that Fresh & Easy lost some £120 million last year and Tesco have mothballed many new openings. They seem increasingly likely to pull out of the USA altogether at a cost to themselves of some £1 billion which is affordable to the mighty T but must hurt neverthleless.
Given that the US economy is so enormous and self-reliant (only 39% of US citizens own a passport, versus 71% in the UK) there’s little appetite for new-fangled British retail methods like self-service checkouts.
Tesco have blamed poor sales on the economic recession but US analysts say that’s wrong. What they failed to appreciate was just how deeply conservative (with a small C) American shoppers are – especially in blue collar neighbourhoods. Given that the US economy is so enormous and self-reliant (only 39% of US citizens own a passport, versus 71% in the UK) there’s little appetite for new-fangled British retail methods like self-service checkouts. Shoppers have complained about portions being too small for American appetites (have you ever seen the size of a US shopping trolley?) and short expiry dates on food items.
‘I’m paying for the groceries so they need to pay for a full service checkout’ is a common complaint despite prices being up to 15% cheaper than the competition. Marketing and products seem to be aimed at more affluent shoppers than the pickup truck-driving, steak-barbequing, good old boy. As one analyst said: ‘Fresh & Easy is a format muddle. Instead of promoting berry-flavoured gourmet cheese and Spanish sparkling wines, they need to focus on the basics: essential food and grocery items at the lowest possible prices.’ Sounds like an Aldi format to me.
And talking of getting a caning…
I tend to shy away from politics but the blistering performance of UKIP in the local government elections was so remarkable I assume the coalition government is getting the message. One of the many issues to have eluded the coalition is how everyone dislikes any government which messes with their home – ‘an Englishman’s home is his Castle’ etc. As well as reneging on the pre-election commitment to abolish Inheritance Tax, HMG have now introduced ‘empty-bedroom tax’ on recipients of housing benefit who occupy Council and Association housing. How unimaginative. No-one likes new taxes but everyone does like opportunities, so why not encourage people to move back into work and use the national property stock more efficiently by incentivising them to let-out empty bedrooms? This could be administered through HMRC and the domestic rating system – and in return the pointless individual rating assessment of Market Hall stalls could be dropped.
The worst recession for 60 years.
And here’s another bright idea – in the middle of ‘the worst recession for 60 years’ why not scrap the HS2 high speed rail line and instead spend a fraction of that on high speed broadband to everywhere in the country to stimulate business development? The government is promoting HS2 to overcome the ‘North-South divide’ but experience from Spain suggests High Speed Rail simply concentrates economic growth in the capital. PS: The business plan is based on a cost of £59 billion versus revenue of £33 billion. Do you reckon you could sell that to the Manager at your Bank?
And finally, the charming story has emerged of an unnamed 73-year old lady locked into a French supermarket over New Years Eve. Apparently she was doing some last-minute shopping in the Intermarche store near Lille when she felt dizzy and retired to the Ladies loo to recover. When she emerged ten minutes later the store was deserted and ferme. She then set off the alarm which was ignored by the local gendarmerie who were enjoying a knees-up, so instead she tried to get some kip in a back office. That didn’t work so she spent the night wandering the aisles looking for bargains before being discovered none the worse for wear the following day. A spokesman for Intermarche cunningly diverted attention from several rather fundamental management failures with typical Gallic sang froid. He announced the supermarket was packed with seasonal champagne and truffles but ‘she was too polite to help herself to food or drink’.
Having made her miss the New Years Eve I hope they had the decency to donate everything needed for a slap-up birthday party.