How secret shopper research shaped Tesco's fresh&easy US launch
When Tesco, the world's third largest supermarket retailer, decided to launch fresh&easy, a chain of small-scale convenience outlets, on the West Coast of America, it treated the high-risk venture "just was we would any new business".
According to Simon Uwins, fresh&easy CMO, this meant sticking to the company's core mission. At the IIR's recent The Market Research Event in Anaheim, California, Uwins gave this as "to create value for customers to earn their lifetime loyalty."
That mantra has driven Tesco as it has expanded in recent decades from its UK homeland to operations in 14 countries, including Eastern Europe and South East Asia. And it was this vision that held true as the West Coast project began in 2005 with "desk research, store visits, qualitative exploration of grocery-shopping behavior, simulated shopping, and brand positioning," Uwins related.
"No one has a right to exist unless they create value for customers. If they do that every day, it builds into lifetime loyalty. We don't believe you can build a successful long-term business by turning on a quick button to get people into stores. We are interested in their loyalty today, tomorrow, next week, next year. We want their children to shop with us in a few years' time."
The key to such brand building on a block-by-block basis, he continued, is "to treat people like you like to be treated. We are about people…. People will shop with you regularly if they like you. We've learned that a happy staff means happy customers. In the end, if they (staff) want to work with you, customers will notice and come back again."
Tesco has "a multitude of formats," Uwins related. "And when I arrived in [the Los Angeles area] three-and-a-half years ago with a small group, our only brief was to see if there was a business we could set up here on the West Coast.
"When you looked across the world, what we were seeing everywhere was the growth of smaller, more convenient, quality discount marketers. In fact, it was happening in most of the Western world. But it wasn't happening here."
Uwins and his team needed to discover if the small-convenient-quality model was absent in the West Coast US marketplace "because it wasn't relevant to them (US consumers) or the way they lived their lives or because no one else had spotted it as a viable commercial option."
So they started talking to people. They spent days doing desk research and making visits to all kinds of stores to "drill down to the specifics" of grocery-shopping behavior. And they had to do so very discreetly, lest one of their suppliers sensed a new Tesco presence and passed the word up the distribution chain to potential competitors.
And some of the discoveries were puzzling. In ethnographic household interviews (30 in Southern California and another 30 in the greater Denver area), people would regularly tell Tesco's researchers that they only shopped in one or two stores for regular groceries, a number that sharply contrasted with syndicated research that suggested that two-thirds of the people in the Los Angeles market shop in more than 28 different stores (including 11 different versions of the same store) for their foods.
"They'd tell us they went shopping every couple of weeks. But when we started to look around their houses and in their pantries, freezers, and refrigerators," the team saw evidence of far more shopping. "We'd come across a product that had the store name of a place they'd never mentioned to us. We'd point it out to them and they'd say, 'Oh, yeah… I guess I do go there every once in a while." And there was food to be found all over the house."
Said Uwins, "I've never been in more garages in my life. Where I come from, garages are for cars. In the US, the number of garages with freezers in them is amazing."
The Tesco team also went shopping with the 60 survey households. They took notes on their habits and what they thought about different products. They had meals with their research subjects and asked them about what they thought about food. They studied the amount of meat each household bought, specifically asking them to buy what they thought were the best and worst meats in a market, and to explain the differences between the two.
The insight: The shoppers had been fibbing in their at-home interviews. "They were shopping in many more stores than they had told us…. And we discovered that convenience was important to them: they liked to shop locally. More specifically, they would shop at one local store and move on to another right down the street. "
Essentially, Uwins and the Tesco team discovered two drivers that supported the value of convenience. One, "there was an underlying concern that food had been mucked around with. A lot of people went to a particular store because they thought the offerings were fresher, less processed, and, in their view, healthier." The second concern? "Price. They all wanted to eek out the most they could get from the amount of money they could spend."
For Tesco, those findings lead to a plan: a convenient store that could provide local shoppers with fresh wholesome food at prices they could afford.
"We went back to London and they asked what we had found in three or four months. We felt we could create value for customers…. 'Give us a couple of billion dollars and we'll find out for sure.' Well, they realized that wasn't a responsible business. But they did ask what we could do to validate out understanding. 'Let us build a shop. We'll get people to come by and tell us what they think of it.'"
Tesco senior management bought into the concept, so the team returned to Southern California and rented a grey utilitarian warehouse by Los Angeles International Airport.
"No one could know what we were doing," Uwins explained. "But we were building a full-scale store."
There were logistics: the team needed to do more than build out the warehouse. They needed product. But, again for reasons of share-price sensitivity, they couldn't stock the shelves through the traditional distribution chains for fear news of the venture would leak.
"We went out and bought representative products in real stores, Uwins explained. "And, you know what? It takes a lot of products to fill up even just one store."
Because paying by credit cards might have compromised their secret mission, Uwins bought his goods with cash. This included the memorable day he shopped for $5,500's worth of cheese. "I got the total from the cashier, went down the street, and came back with a bag full of money."
To push the test ahead, the Tesco team invited 200 people from Los Angeles and Denver to come in and shop at the new "store". By and large, "people felt very strongly about how much they could get in a small space. 'This is so fresh,' they told us. 'This is so easy.' Maybe we didn't stock 19 different cans of tuna. Maybe we only had two or three varieties. And they were happy."
Another efficiency, in terms of time and shelf space: All the products in our store were put out in trays, with 12 boxes in a tray. We tried to keep it simple, to deliver [upmarket U.S. grocer] Whole Foods products at a Wal-Mart price."
And there was an unexpected bonus: positive word-of-mouth reaction from shoppers.
"In nine months," Uwins told the IIR audience, "we'd moved from a research project to build a business. We still could go back to the Tesco board and tell them we wanted a couple of billion to get up and running, but we decided to make sure that we could develop something that delivers on our promise. So, we ended up writing down some very simple statements of what kind of business we felt this needed to be for the people who'd work there and for the shoppers who would come there.
That list would grow to include:
- Fresh food and an easy shopping experience
- The company would be a good corporate neighbor
- It would provide a great place to work. Uwins: "Our research showed that people were absolutely clear where they were getting good service and where they weren't. And they told us they enjoyed shopping in stores where the employees seem to enjoy working."
- Keep things simple. Uwins said: "There's a research trap you can fall into of segmenting, segmenting, and segmenting. And you get to the point where you ask yourself, 'How can we do all this stuff?' The food business, in fact, is fairly consistent. There are only a few things really important about food shopping. Concentrate on them, do them better than anyone else, create value for your customers who want to shop with you."
- Keep the proposition simple: For example, "Whole foods at a price associated with Wal-Mart"
- Provide great food customers trust-no artificial colors or flavors; no trans fats; no preservatives unless such additives were not essential to the safety of the product.