Wal-Mart belongs, Kroger belongs, Safeway belongs, Costco belongs. Not only do they belong, but they are active participants. Yet Tesco has elected not to join any of the vertically integrated trade associations common to this industry. Why doesn’t Tesco join?
In the answer to that question, we can find the root of many of the problems Tesco’s venture in America is experiencing.
As we have studied the launch, we have come to realize that Tesco, which has so emphasized its “green’ credentials, sustainability and its social responsibility, had violated the basic precepts of these movements in its approach to America.
It is well known that Tesco did enormous amounts of consumer research in planning for the Fresh & Easy launch. An article in The Economist put it this way:
The company has spent years gathering detailed information on every aspect of American life. Most retailers would think they had done their homework after the usual focus groups and surveys, but Tesco went much further. Researchers, including a small cohort of top executives, spent two weeks living with 60 American families. They poked around in their kitchen cupboards, watched them cook and followed them as they shopped. “They’d been studying the city for about a year before they came to us,” says Scott Motley, who works for the city of Phoenix, which with the Greater Phoenix Economic Council helped Tesco find places to put stores.
Forbes said this:
In 2005 it set up a faux store inside an old warehouse in Los Angeles and told those who asked that it was a movie set. It invited groups of 250 customers in order to watch how they shopped and ask for feedback. Then Tesco researchers moved into 60 California families’ homes for two weeks, rifling through their fridges and cupboards, shopping and cooking with them, and keeping diaries of their every movement, from how they got their kids to school to what they did at night.
Yet all this consumer research, important as it may be, did not address the environment within which Fresh & Easy would operate here in America.
The very first person to tell us that he thought Fresh & Easy would fail was an important editor at the major newspaper in one of the cities Tesco has opened stores. He had come to despise Tesco. Despite the fact this was clearly a person Tesco should have been cultivating, Tesco refused to return his phone calls, refused basic courtesies, such as telling him the name of people holding particular positions. At one event, and we heard this from several people, he had been given a business card with a direct dial number and, in public, was nicely invited to follow up. Afterwards the phone was never answered. Calling the receptionist didn’t help, nobody would give out an accurate phone number.
This editor, with a readership including many customers Fresh & Easy would want to have, plus the ability to influence zoning, public policy and much more, was understandably miffed at being treated so shabbily.
But beyond his personal pique, the experience made him think less of the company. As he said to us at the time: “If they have done such a poor job researching the role of the media in America and how to cultivate and develop a relationship that will pay off for them big time down the road, then why should I have any confidence their research in other areas was very solid.”
If you take “Sustainability 101,” you learn about stakeholder engagement. Basically, it is the process by which you map out who might be able to help or hurt your organization and then engage with them.
Of course, you are not obligated to agree with anyone, but you hear them out and pay them a certain degree of respect. You might get some good ideas.
If you are launching in a new culture, you learn what is expected.
In not becoming a member of our trade associations, we suspect Tesco doesn’t even know it is doing anything unacceptable to anyone. Tesco probably figures that since Wild Rocket, the produce vendor brought over from the UK, is a member of these associations, it is covered.
But they are wrong. In America it is expected that the retailer itself, not a supplier, will participate. There are a lot of people, important people, who remember a few years back when Tesco was doing an exploratory trip to California, it called on the industry trade associations to ask for help. Tesco received the help it was asking for.
Yet Tesco won’t pay a few grand in dues now.
We could make a case why, expected or not, they should join. They should join PMA and United and the Fresh Produce and Floral Council, of course. If they were smart, they would reach beyond the expected associations and join the Western Growers Association too, just to show some respect for the production side of agriculture.
If they were really smart, Tesco would not only join but call the associations and ask how they could be actively involved. Tesco should try to get Fresh & Easy personnel on committees so that in a few years, they would be seasoned and ready to be on the Board of Directors. The contacts they would make and the relationships they would build would pay off for Tesco a thousand-fold.
Especially since the alternative is operating an insular organization and missing out on so many opportunities to bring ideas in from the outside.
Perhaps you are thinking those Tesco folks are a little busy right now handling this launch.
Or maybe you are thinking that the “dream team” Tesco sent over to launch Fresh & Easy know what they are doing and don’t need contacts or advice from a bunch of produce folks.
We won’t deny the brilliance of this management team nor their record of accomplishments. Yet, the fact remains, they are strangers in a strange land, and they are badly miscalculating the cultural imperatives.
They should learn from Bruce Peterson. Bruce was the second-to-last person hired by Sam Walton. Because Bruce had worked at Meijer, he had some basic idea of how produce can run in the context of a supercenter. Yet, having worked in the Detroit market as well as at retail, he fully understood the culture of the industry.
What did Bruce insist on in his interview with Sam Walton? That Wal-Mart, which had been a sheltered Arkansas company that didn’t typically engage, must actively get involved with the produce trade associations. Bruce told Sam that he didn’t think Wal-Mart could succeed in produce without that engagement.
The truth is that this was and is an easy call. When you travel you just look at what the natives do to know what is expected. Tesco just needs to look around and see what the American chains are doing to be a part of the industry.
It is never too late to start.