UK Supermarket Giant 's California Scheming

07 November 2007

HEMET, California: The headstone of history is littered with the names of British retailers who thought they could crack the US market, among them Sainsbury's and Marks & Spencer.

The latest brash Brit to prospect for Californian gold is global retail titan Tesco, which in the UK commands over 30% of all supermarket sales and additionally ingests one pound in every eight spent in the entire UK retail sector.

Unlike earlier invaders, Tesco is adopting a softy-softly approach, in recent weeks opening Fresh & Easy, its first US 'convenience' outlet, in the small city of Hemet (population 67,000), near Los Angeles.

The intent is to trial the new store's operating systems before opening five larger F&E-branded outlets in southern California later this week.

Explains a Tesco spokeswoman: "We need to have live customers in order to test the systems in the [Hemet] store. It is entirely logical to do this ahead of the grand opening on 8 November."

The Fresh & Easy concept is more akin to a neighbourhood store than a traditional supermarket, and replicates the retailer's successful Tesco Express business model.

Despite current fears of recession, the moneymen believe that 'walk-on-water' Tesco could be the first overseas retailer to conquer the US.

According to Citigroup retail analyst James Anstead: "Tesco's entry could potentially go down as a genuine turning point in the industry, possibly comparable with Wal-Mart's decision to start opening Supercenters in the 1980s."

While Credit Suisse forecast in a recent report that Tesco's US sales could reach $1bn within three years, and capture 2%-6% of the local market share over five years.

Data sourced from BBC Online (UK); additional content by WARC staff