Tesco struggles to build loyalty in coupon crazy US
Tim Mason is having a rather difficult time as head of Tesco operations in the US building a convenience chain called Fresh & Easy. He is finding that competing on anything other than price has not been easy at all.
Mason recently admitted that its early market research may have been wrong, because although they spoke to lots of people in their kitchens they “did not poke around their garages, where they would have found huge freezer chests bulging with stockpiled meat bought on special offer.
Because the US market is so focused on money off coupons and special offers, many decisions on where to shop are done on a week by week basis.
He told the Times newspaper: “There’s less loyalty in the American market,” said Mason. “A Brit has to hear it a few times before you accept that people make up their mind where to go each week when they check out the special offers round the kitchen table.
“In a key moment at a focus group, one man told them that he had stopped shopping at Fresh & Easy because they no longer sent him a flier promoting the latest special offers.
“We came out of that meeting and said we had better make sure we hit everyone in the area with fliers.”
Christmas sales were up 35% (Tesco won’t give out actual numbers), and expansion is ramping back up with the company is opening about one store a week but Tesco lost more than $250m in 2009 on its US small-grocery chain even as it slowed the growth of the venture. That’s about US$2m a store.
Tesco CEO Sir Terry Leahy still believes the Fresh & Easy Neighborhood Market chain will be a success for one very specific reason: Convenience “is a relatively underinvested segment of retailing” in the United States, he said.
Speaking at the National Retail Federation’s 99th annual Convention & Expo in New York, Leahy expanded on the thought. “Convenience is the fastest-growing sector of retailing around the world. One exception, interestingly, is the US.”