Although the report is relentlessly upbeat in tone, we find the data much less encouraging as to the prospects for Fresh & Easy.
In fact what these researchers report as proof of “broad appeal” we interpret as telling us — if the data is actually accurate — that Fresh & Easy appeals only to a very limited income cohort.
Here is what the report says about the income of shoppers:
“The average gross household income of all shoppers was quite high at $82,500 (versus $70k US average), but it ranged from $68k to $100k depending on a store’s location and matched each store’s local demographic. If there is a group that is not yet particularly shopping at F&E, it would potentially be 18-24 year olds on lower incomes, and possibly very large families on lower incomes. Otherwise we think it’s fair to say F&E has a broad appeal.”
The use of “average” gross income figures would not typically be done in America. These types of studies use a median rather than an average — or mean — figure because small numbers of very wealthy or high income people distort averages.
Imagine a store with ten customers. They consist of nine penniless welfare recipients plus Bill Gates. On average, the ten customers of that store are billionaires.
The median income would more accurately help you merchandise the store, as it tells you that the median income is welfare level.
If we are going to use average income, these numbers do not show, as the researchers argue, broad appeal. The report is written obliquely and thus is quite difficult to read with certainty. Thus we are not quite certain if the researchers are saying that the lowest household family income they could find in any of the shoppers at any of the stores was $68,000 and the highest $100,000 or if the researchers are saying that the average gross household income for each individual store ranged from $68,000 to $100,000, depending on neighborhood.
In either case it appears, however, that like Europeans of old who got on boats to come to America thinking our streets were paved with gold, so these researchers in London seem to think we are a much wealthier country than we are.
We’re not sure where they picked up the $70,000 US average household income — the researcher doesn’t believe in footnotes — but that is not important anyway. As we said, small numbers of very high income people distort that statistic so it is not a very useful one, especially for the grocery store industry where massive incomes do not correlate with massive increases in grocery store purchases.
What is relevant is that for 2006 — the latest statistics that are finalized — the U.S. Census Bureau reports this:
Real median household income in the United States climbed between 2005 and 2006, reaching $48,200, according to a report released today by the U.S. Census Bureau.
Median in this case means that half the households in the US have household incomes below $48,200.
Yet the researchers from Execution tell us “The average gross household income of all shoppers was quite high at $82,500 (versus $70k US average), but it ranged from $68k to $100k…”
So basically, the data Execution collected tells us that there is little support for the Fresh & Easy concept among two groups:
1. Households with incomes below $68,000
2. Households with income above $100,000
The Execution researchers don’t realize it but, if their data is correct, they have identified why the concept may fail: the vast majority of US households earn less than $68,000 per year. The top quintile of earners — those who can really spend big bucks — doesn’t start until $100,000 a year in household income.
Take a look at the breakdown of Household Income for 2006 as defined in the Annual Social and Economic (ASEC) Supplement from the Current Population survey, a joint effort between the Bureau of Labor Statistics and the Census Bureau:
Table HINC-06.
Income Distribution to $250,000 or More
for Households: 2006
[Source: U.S. Census Bureau, Current Population Survey, 2007 Annual Social and Economic Supplement.
Numbers in thousands.
Households as of March of the following year.
| Number | Mean Income | |
| Income of Household Total |
116,011
|
66,570
|
| Under $2,500 |
2,533
|
295
|
| $2,500 to $4,999 |
1,030
|
3,737
|
| $5,000 to $7,499 |
2,124
|
6,431
|
| $7,500 to $9,999.. |
3,002
|
8,713
|
| $10,000 to $12,499 |
3,677
|
11,206
|
| $12,500 to $14,999 |
3,203
|
13,668
|
| $15,000 to $17,499 |
3,677
|
16,088
|
| $17,500 to $19,999 |
3,169
|
18,646
|
| $20,000 to $22,499 |
3,886
|
21,056
|
| $22,500 to $24,999 |
3,005
|
23,690
|
| $25,000 to $27,499 |
3,750
|
26,007
|
| $27,500 to $29,999 |
2,880
|
28,629
|
| $30,000 to $32,499 |
4,096
|
30,976
|
| $32,500 to $34,999 |
2,627
|
33,643
|
| $35,000 to $37,499 |
3,489
|
35,989
|
| $37,500 to $39,999 |
2,486
|
38,635
|
| $40,000 to $42,499 |
3,607
|
40,956
|
| $42,500 to $44,999 |
2,270
|
43,620
|
| $45,000 to $47,499 |
2,879
|
46,022
|
| $47,500 to $49,999 |
2,195
|
48,606
|
| $50,000 to $52,499 |
3,354
|
50,921
|
| $52,500 to $54,999 |
1,920
|
53,655
|
| $55,000 to $57,499 |
2,428
|
56,017
|
| $57,500 to $59,999 |
1,828
|
58,660
|
| $60,000 to $62,499 |
2,712
|
60,873
|
| $62,500 to $64,999 |
1,645
|
63,678
|
| $65,000 to $67,499 |
2,108
|
65,965
|
| $67,500 to $69,999 |
1,424
|
68,620
|
| $70,000 to $72,499 |
2,332
|
70,960
|
| $72,500 to $74,999 |
1,399
|
73,664
|
| $75,000 to $77,499 |
1,906
|
75,972
|
| $77,500 to $79,999 |
1,267
|
78,686
|
| $80,000 to $82,499 |
1,784
|
80,903
|
| $82,500 to $84,999 |
1,223
|
83,606
|
| $85,000 to $87,499 |
1,425
|
85,986
|
| $87,500 to $89,999 |
1,009
|
88,603
|
| $90,000 to $92,499 |
1,437
|
90,955
|
| $92,500 to $94,999 |
1,008
|
93,653
|
| $95,000 to $97,499 |
1,167
|
96,039
|
| $97,500 to $99,999 |
898
|
98,652
|
| $100,000 to $149,999 |
13,385
|
119,461
|
| $150,000 to $199,999 |
4,751
|
169,454
|
| $200,000 to $249,999 |
1,776
|
219,377
|
| $250,000 and above |
2,240
|
448,687
|
On the graph above we have highlighted the income cohorts that roughly corresponding to those that Execution finds to be the core for those who shop at the Fresh & Easy stores.
Note that households with incomes ranging from $67,500 to $99,999.99 account for only 15.7563% of US Households.
In other words, despite all the spin and the PR, the actual data in this Execution report is wildly negative for Fresh & Easy. It indicates it is a concept with narrow appeal. It neither appeals to the half of American households that earn below the median household income, nor does it appeal to the elite that earn in the top 20% of households.
