Some Fresh & Easy Info

Fresh & Easy is reported this morning as having taken £76 million from its first store opening last October to 23rd August this year with an attributory looss of £60. Tesco say in their interim statement:

'The early progress of Fresh & Easy, just nine months after the first store opened, is very encouraging. Customer response to our combination of fresh, wholesome food at very competitive prices in neighbourhood locations has been extremely positive. With the number of stores now at almost 90 and growing rapidly, feedback from new as well as regular shoppers continues to surpass our expectations.

Sales densities are building well, with the average running at $11 per square foot per week, which is already substantially higher than the US supermarket industry average. Our best stores are now running at more than $25 per square foot and the stores opened since the Spring are averaging sales densities close to $13 per square foot per week.

The modest adjustments we made to the store format and offer in response to initial customer feedback - a warmer in-store ambience, the introduction of a small number of promotions, more prominent point-of-sale material and some new products - have proved popular with customers.

Our Riverside DC and kitchen operations are coping well with growing volumes - with the capacity in place to serve hundreds of stores. Fresh foods and Fresh & Easy own brand products, which represent 60% and 72% of sales respectively, have been particularly well-received by customers.

Site acquisition for our 10,000 square foot neighbourhood stores has made further good progress, helped by availability of suitable leasehold property and the rate of new openings is gradually accelerating to the pace we require. We have secured a significant number of sites in Northern California, and whilst we are continuing to incur costs in preparing for this next stage of expansion, no decision has been made on its' precise timing.'

Clearly one would not expect a trading profit in the first 9 months of any bricks and mortar retail business as it builds estate and infastructure. But one would also not expect them to say anything about the project but in positive terms. That said there are one or two questions left hanging:

1. What is the required pace of store opening and when will it be achieved?

2. How long before the business unit starts to fund its own development?

3. How ready are they for tomorrow's economic condition of sharply reduced credit?

4. Are they finding that trade creditors demand a much shorter payment cycle than their UK suppliers?

5. Just where do they want to take the business and when do they expect to go beyond the three states they trade in today.

I think that the most interesting thing that has been said about Fresh & Easy in recent weeks has been by Wal-Mart, Inc. CEO Lee Scott at Goldman Sachs (investment bank) annual retail industry conference. Fresh & Easy Buzz reported:

'Scott was asked about his thoughts on Tesco's Fresh & Easy Neighborhood Market, the United Kingdom-based global retail chain's small-format food and grocery retailing venture in the Western U.S. states of California, Nevada and Arizona, which is now up to 82 stores in only 10 months of store operations. Answering the question, Scott said he has heard mixed reviews about how Tesco's Fresh & Easy Easy was doing, and that he wasn't paying all that much attention to it on a regular basis, two sources who attended the retail conference told Fresh & Easy Buzz. However, he then said: "The thing that bothers me is Tesco is a very good retailer. I have a lot of faith that they will find their direction and it is something we need to pay attention to," our sources said.'

Less than a year into having stores open Tesco would appear to have much to learn, but with 4 years to go before Terry Tesco and his team can pick up the big bonuses for a job well done they have time to focus on the detail for their success. It is not going to be easy as Wal-mart start to open their own small (20,000square feet) stores this week.

I think that the winners of this big retailer contest will be the American shopper and any interested retailer how wants to learn from this 'Big Boys' school of retailing!