Tesco changes US strategy

03 March 2009

EL SEGUNDO: Tesco, the world's fourth-largest retailer in terms of sales, has amended its strategy in the US, where its Fresh&Easy chain is now focusing on price cuts and budget brands, both in-store and in its ads.

When Fresh&Easy launched, Tim Mason, its president/ceo, said it was basing its offering round "specialty standard foods at everyday prices."

However, he argues "the world is a very different place now", requiring a completely different strategy to meet challenging economic conditions in its core markets of Arizona, California and Nevada.

Its new initiatives include launching a budget brand, Buxted, which offers cheaper meat and fish, as well as running more frequent promotions focusing on "extra low price" rather than "every day low price".

It has also begun running ads on radio – alongside its earlier strategy of employing direct mail, online and fliers – with messages increasingly focusing on its discounting credentials.

Mason argued the move was motivated by the fact that Tesco had learned that "'Every Day Low Price' is not that interesting" – rather, he says, "people are buying on deal."

While Fresh & Easy produces an average $11 (€9; £8) of revenue of square foot a week, above the industry norm, it will not reach its original target of having 200 stores in the west of America by November.

A recent assessment of Fresh&Easy's performance by JP Morgan argued it was "not performing up to expectations", which could not be blamed on the recession, because a "soft discounter, selling only food" should be "relatively immune" to the crisis.

Data sourced from Wall Street Journal; additional content by WARC staff