We’ve been helped by many correspondents in covering Tesco’s Journey to America, and some of the more intriguing contributions have come from David J. Livingston, a longtime retailer who now operates a consultancy under the name DJL Research, LLC.
You can read some of his previous contributions below:
Kroger And Tesco Approach Store Acquisitions Differently
Aldi Challenges Wal-Mart As Low-Price Leader
Reading Tesco Between The Lines
When Tesco finally came clean and acknowledged its “research” had led it to misunderstand American consumers, we wrote a piece titled, Tesco Comes Clean: “Less Loyalty In American Market,” which led David to send us another note:
It seems like it took forever for the first Tesco Fresh & Easy store to open after they first announced they were coming. Consumers were expecting Whole Foods products in Trader Joe’s size stores with below-Wal-Mart pricing. When they didn’t deliver on those expectations, we saw stores expected to do $200,000 per week only doing $50,000. And now they are complaining about having to get down and dirty on pricing?
Remember when they said they were going to limit the number of vendors delivering to the stores because they wanted to help the environment by reducing pollution? What they didn’t say is that the vendors most likely told them that it simply was not profitable for the vendors to deliver such a small amount of product. Yeah, like the Coca-Cola driver wants to drop off three cases of soda or the bread company wants to drop off ten loaves of bread.
Then Tesco got all the liberal hand-wringers excited when they announced they would open stores in the underserved inner city areas. I wonder just how many cupboards their market research people poked around inside the homes of those neighborhoods? Maybe it is rational to conclude that when the researchers saw McDonald’s wrappers and Banquet TV dinner boxes in the garbage cans, executives at Tesco cleverly divined from the research that these consumers were desperate for an opportunity to buy private label, preferably organic, fresh foods in a small format store.
My guess is that some executive had already made up his mind on what Tesco was going to do. Then used “selective” market research results to show his concept was what Americans wanted.
Remember those press releases with all those confusing figures to try to show how well Fresh & Easy was performing? Basically what I got out of it was that perhaps a few stores were performing above the normal average sales per square foot during grand opening weeks only.
Turns out Fresh & Easy is just another sign on those B location strip centers, going mostly unnoticed.
— David J. Livingston
DJL RESEARCH, LLC
In business, research is often conducted to serve the purposes of those who contract for the research. In fact, it is fair to say that it is typical in business to hire researchers for the purpose of providing evidence that justifies doing what you want to do anyway.
Indeed the very concept of Fresh & Easy and its small-store orientation has always had a whiff of deriving virtue from necessity.
Think of how convenient it was for Tesco — the third largest retailer in the world, desperate to set up a US division without doing an acquisition which was strongly opposed by the City in London — that its research showed that what consumers wanted was a small-store concept.
After all, if its research had shown that Americans liked 60,000 square foot supermarkets on prime corners, Tesco would have been faced with a decades-long project to acquire a critical mass of such sites in any major city without buying an American chain.
If research had shown Americans like 200,000 square foot super centers where they can buy food and non-food with one stop, Tesco would have had lawsuit after lawsuit as it attempted to build these big boxes.
How convenient it was that the research showed that Americans yearned to buy groceries in a bunch of defunct Rite Aid stores, precisely the real estate that was available.
It never really made any sense. Sir Terry Leahy, Tesco’s CEO, gave a famous interview in which he declared himself shocked at how many different stores Americans felt compelled to shop in.
He said that Fresh & Easy was designed to make this all unnecessary. This seemed to indicate that Tesco’s management was oblivious to the lack of logic in thinking that a consumer, who was willing to search a club store, a super center, a regular supermarket, an organic and natural store, a convenience store, an ethnic store and various other retailers to find all they wanted, would somehow miraculously be satisfied with mostly private label product in a 10,000 square foot store.
Even now, Tesco’s inability to solve the problems with Fresh & Easy hinge, as much as anything, on its unwillingness to listen — to the customer, to the trade, to anybody — because of its pre-determined notions of what it is going to do.
So it keeps offering this uniform assortment across all stores despite the fact that it doesn’t work.
It refuses to split in two and make some stores Trader Joe’s clones and others Aldi clones, as we have recommended, despite clear indications that this is a way to make small stores work.
It is almost as if they would rather go down waving the Tesco banner than change in a way that will work in the American milieu. Some things just get stranger and stranger.
Many thanks to David J. Livingston and DJL Research for providing input on this important case study.