Tesco exerts muscle in UK, innovates more in U.S.

Articles
January 09, 2009

Tesco exerts muscle in UK, innovates more in U.S.

Tesco is waging competitive battles on two continents—using its deep customer insights to plot measured expansion in the United States, and to imprint a price leadership image in its United Kingdom homeland. Its growth of Fresh & Easy in the U.S. has already shown off some of its winning strategies from abroad, and has launched many retail imitators who fear being left behind in case the smallish format heavy on prepared foods truly catches on with American consumers. If it catches on, it will not be because of size alone, but because Tesco operates in sync with consumer wants and needs. For example, the Fresh & Easy stores in the U.S. are launching 98-cent Produce Packs this week “to help customers start the year off right without breaking the bank,” said Simon Uwins, chief marketing officer of Fresh & Easy. “We’re making changes so customers have more choices in the way they are feeding their families.” Delivered fresh daily to stores and currently including apples, oranges, peaches and tomatoes, customers will always be able to choose from six different fruits and vegetables which will rotate by season and availability. “Customers are trying to stretch budgets…but they don’t want to compromise on quality or freshness,” he added.

Tesco is waging competitive battles on two continents—using its deep customer insights to plot measured expansion in the United States, and to imprint a price leadership image in its United Kingdom homeland.

Its growth of Fresh & Easy in the U.S. has already shown off some of its winning strategies from abroad, and has launched many retail imitators who fear being left behind in case the smallish format heavy on prepared foods truly catches on with American consumers.

If it catches on, it will not be because of size alone, but because Tesco operates in sync with consumer wants and needs. For example, the Fresh & Easy stores in the U.S. are launching 98-cent Produce Packs this week “to help customers start the year off right without breaking the bank,” said Simon Uwins, chief marketing officer of Fresh & Easy. “We’re making changes so customers have more choices in the way they are feeding their families.”

Delivered fresh daily to stores and currently including apples, oranges, peaches and tomatoes, customers will always be able to choose from six different fruits and vegetables which will rotate by season and availability. “Customers are trying to stretch budgets…but they don’t want to compromise on quality or freshness,” he added.

To SupermarketGuru.com, the Produce Packs are one more example of Tesco’s consumer sensitivity that will be hard to beat, if not match consistently, unless U.S. retailers begin to think and act in similar fashion to serve consumer interests.

On a larger scale in the UK, Tesco threw down the gauntlet this week after Asda lowered prices permanently on 1,000 everyday items. Tesco cut its prices on 3,000 staple items, and launched a national marketing campaign to highlight them, according to an account in the UK Telegraph. 

“This is the time of year when supermarkets try to underline their value credentials,” Bryan Roberts, global research director at Planet Retail, told the publication. “The credit crisis has rendered this year’s price spat more important than ever.”

Said Richard Brasher, Tesco’s commercial and marketing director: “The cost of shopping is more important to customers than it has ever been.”

So Tesco exerts force when needed, and merely plucks produce for consumers when that is called for. Though brash price cuts at Fresh & Easy stores in the U.S. may not be necessary anytime soon, domestic retailers planning to face off with them here should heed the lesson of Tesco’s current price war with Asda in England.  They’ll command their (usually superior) customer insights and their (considerable) resources to assert bold positions with shoppers. Be ready for a major tussle if headed for a direct conflict.