We are not exactly sure what it means to be the “new cult retailer” or to say that “F&E is already an incredible success story,” but it apparently doesn’t mean that current sales are very good. The report contradicts itself in some places and the rhetoric is over-the-top, so we prefer the more somber dictates of the math provided.
Here are two hard facts presented in the report:
A. Consumers are spending about $30 a trip at Fresh & Easy:
“The very encouraging news for Fresh & Easy is that already regular customers are spending an average of $125-$135 a month at F&E. That means F&E is already capturing a third or more of their customers’ monthly grocery spend (visiting 4-5 times a month and spending around $30 a time).”
B. The stores each attract between 2,000-2,500 customers each week.
“Our researchers noted that typically stores were attracting between 20 and 30 customers an hour. Footfall was pretty even throughout the day, with some peaks in the early evening (25% of customers were shopping for a meal that evening). There may be some sampling bias that led our researchers to underestimate footfall, but we estimate that, at present, F&E is attracting around 300-350 customers per day, equivalent to 2,000-2,500 customers per week.”
Our own analysis shows more customers with smaller baskets but, for argument’s sake, let us accept these numbers as valid. What do they imply for actual store sales?
2,000 trips a week x $30 per trip = $60,000 sales per store per week
2,500 trips a week x $30 per trip = $75,000 sales per store per week
This is right around our numbers and a big disappointment for stores that Tesco expected to be doing $200,000 a week. We do not think the stores can be profitable at this level of sales, much less earn a decent return on investment. Especially because this level of sales has only been obtained at the price of heavy discounting such as $5.00 coupons off a $20.00 purchase and massive mark-downs on perishables as they near their expire dates. It is perplexing to us that the report would have no mention of any of this.
Also very interesting is what the report doesn’t say. Although it makes a point of mentioning that the researchers had been in stores ranging from those open 5 months to those open only 7 weeks, this very upbeat report never claims that the older stores are selling a lot more than the younger stores.