Fresh & Easy: A hard start ?

A lot of speculation has already started regarding the performance of Fresh & Easy Neighborhood Market, the food chain recently launched by Tesco, the largest British retail, to enter the US market. Questions came up after the announcement that Tesco will put a halt on the opening of additional stores in the next three months.

It is too early to say whether the business model chosen will be successful or not. Any new business needs time to assess initial performance and implement corrective action to unforeseeable challenges, and then proceed with a more prudent and robust roll out.

Tesco executives agree that Fresh & Easy will report loses in the first year given the initial launching costs, but many stores have already reported beyond expectation sales compared to industry averages – $20 in sales per square foot per week versus an industry average of $9-10.

Entering the highly competitive US market is not an easy task, even for the giant retailer. The challenge becomes bigger given the differentiated business model adopted – limited branded products with more fresh, ready-to-go offerings – and the decision to grow organically with a new brand, which will require time for American consumers to learn and adopt.

Given the culture of constant learning embedded in its business and the deep pockets to finance the project – Tesco reported a $5.5 billion profit in the last fiscal year – the game has just started and is far from being over.

A better assessment will be possible in September when the company promises to report first financial results for the new chain.  

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