Tesco Slows US Expansion

British grocer Tesco has made a lot of waves in the industry with the roll out and expansion of its Fresh & Easy chain on the West Coast. But now the retailer plans to slow down its growth.

According to a blog by the chain’s marketing director Simon Uwins, the company is now “pausing for breath” before it continues to open stores. After opening its first 59 Fresh & Easy units in Arizona, California and Nevada, management will wait three months before a further roll out, with the exception of a few Phoenix stores.

Why?

Uwins points out that Fresh & Easy still has hundreds of stores in the pipeline, and that it has grown rapidly since opening the first location in November. Now Tesco needs time to “kick the tires, smooth out any wrinkles, and make some improvements that customers have asked for.”

Not mentioned in the blog are problems with the economy or slowed construction of shopping centers. Additionally, grocers seem to have fared well so far in the economic downturn.

Is Fresh & Easy’s slowdown prudent and simply good business in a real estate sector where many chains are accused of overexpansion? Or do you think the economy is playing a role in its decision?

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19 Responses to “Tesco Slows US Expansion”


  1. 1 Mathew Avrhami April 1, 2008 at 11:02 am

    Other articles on the expansion pause indicate that Tesco has always planned on stopping to breath, re-assess, and make improvements before continuing their rapid pace.

  2. 2 Rodney Tucker April 1, 2008 at 12:19 pm

    As the US face of a UK based real estate development company, we are particularly interested in Tesco’s interpretation of the US market, most specifically from a culturally based marketing point of view. I have personally toured several of their stores and as an American citizen, find the stores have missed the mark. The stores have an almost warehouse feel to them. Many of the people I’ve spoken with have viewed it as a one-time experience….they’re not going back. Is the concept of a larger, more extensively stocked convenience store hybrid legitimate; most probably, but to have mistakenly interpreted the targeted customer’s buying psychology may be economically fatal.

  3. 3 fred April 1, 2008 at 2:08 pm

    Hi,

    I’m very interested in purchasing some real estate, particularly big buildings over 40 stories high. I am new to the country and would like to invest some big capital, maybe in the billions. It’s all sorts of big money, capital backed by many Euros and the like.

    Who can I contact with?

  4. 4 Ed Harris April 1, 2008 at 3:06 pm

    Don’t count on Tesco slowing down for long. They’re running out of expansion space on this side of the pond..

  5. 5 Rodney April 1, 2008 at 4:10 pm

    Hi Fred,

    I work for a development consulting firm and would be interested in speaking with you about your capital investments. I have an extensive network of realestate professionals who may be able to assist you.

  6. 6 Douglas Scott, CCIM April 1, 2008 at 9:25 pm

    Hi Fred,

    I can put you touch with some contacts. Send me an email with your contact information (dscott@cencorrealty.com).

    Regards

  7. 7 Wes April 2, 2008 at 9:34 am

    Who comes to a blog saying they are new to the country and has billions to invest in real estate. Doesn’t sound very professional in my opinion. And his name is fred? Is this a new thing to do? Clue me in.

    Thanks

  8. 8 Nancy Hamel April 2, 2008 at 9:57 am

    I’m with you, Wes. Oh, and by the way, you just won a gazillion bucks in the West Indies Lottery. Be sure to call this 967 number right away. Honest.

  9. 9 Ethel April 2, 2008 at 8:57 pm

    How do I get in touch with Fred? My portfolio is laden with a ton of debt and I need to bail now.

  10. 10 Franz April 3, 2008 at 8:46 am

    Hello,

    I am much delighted to take watch of real espate, expecially those with the retale sides of thins.

    I like the Dunkins Donut, but I thins I like Starbux cause on teh retale side they pay moar attension to the “kustomr experence,” but lately they have been doins stuff like EGG and donut sandwich and that takes away frm the overall coffe place which i like a lot, even with the big cushy chares!

    I peferred wens they payed attentions to coffee only, expecially the big ol’ venti ones! With whipped and a cimanon swurl.

    Theose bartistas are pretty nasty tjhough and so forth ands one times they put double espresso in when I akesd for a tea! And whens I returend it the lady yelled at me “IT’S NOT MY FAULTS!” So they should do somes retraynin.

    So I expreiate your attentions to the retale side of things in the real espate indussy, ands I like to start my day with yeur blahg.

    From now on, Dunksin Donut!!!!
    Franz

  11. 11 Jackson April 3, 2008 at 10:59 am

    Hey Fred:

    Me too. Maybe we can JV some of these deals together.

    Jackson

  12. 12 John April 3, 2008 at 11:21 am

    Two things:

    1) One problem with Tesco is that people typically only know about them through media reports of their expansion, but I still do not know anybody that has seen a commercial or received a mailer. Perhaps, they need to improve their marketing efforts or I simply do not watch enough TV.

    2) Ethel – My firm specializes in maximizing value for debt-laden assets. We have access to a variety of internal and external capital sources in this environment. Email me at jandreini@capitalpacific.com.

  13. 13 Fred April 3, 2008 at 11:32 am

    You all laugh at me now, just wait and see as I concor Dallas, Denver, Then your companies! PLease call me for investment Opportunities . I have more Euros than I know what to do with

    Regards, Fred

  14. 14 Mark April 3, 2008 at 12:32 pm

    Try connecting with the community like joining the local Chambers of Commerce.

  15. 15 iritter April 4, 2008 at 7:56 am

    Thanks Franz! Glad you like the “blahg.” I’m sure that all of the Starbucks executives who read this will take note of your suggestions and make the appropriate changes.

  16. 16 Nancy Hamel April 4, 2008 at 12:27 pm

    Fred,
    Listen to Mark. Join the local Chamber of Commerce. Look for development forums that you can attend. If you want to meet people who will take you seriously and can put you in touch with developers and city officials who will have info on commercial real estate (what’s available, what’s online, what’s in the works…), then you need to go through a different channel than a blog.

  17. 17 Lou April 7, 2008 at 8:40 am

    Fred,

    We are developing retail centers in Pennsylvania, Delaware and New Jersey. I would like to share our pipeline with you, maybe you will have an interest in becoming an equity partner.

    I look forward to hearing from you.email me at lstackeni@rdgllc.com

    Regards
    Lou

  18. 18 Peggy April 7, 2008 at 9:10 am

    I am a shopping center transactional attorney who ran into the TESCO site selection folks (6 fellows!) while I was taking an airplane trip from LAX to San Francisco. They did not do a good job of staying incognito. I asked them several questions about their expansion plans: (1) why start in CA — most expensive/complicated place to start & difficult to reach critical mass for advertising; (2) how to handle the brutal competitive market in CA (see environmental-based legal challenge to their distribution facility as case in point); (3) how to handle the union issues that have plagued the industry there. Their response was (paraphrased) “We are TESCO. We don’t need to advertise. We’re not worried about any of the things you mentioned, because we are always successful whereever we go.” If they used outside consultants to plot their strategy, they should get their money back; if they came up with the strategy on their own, then their failure will be directly proportionate to their arrogance. I can’t think of a dumber national rollout plan for a new concept than one starting in Los Angeles.

  19. 19 Nancy Hamel April 7, 2008 at 11:54 am

    If you think about what has happened to other retailers who rushed into massive expansion, such as Krispy Kreme who exploded and died, it becomes more apparent that no matter what the economy is doing, it is a smart move to slow down and breathe – take a look at what the new stores that have opened are doing, and assess whether further expansion is smart. The economy just makes this an even smarter time to move cautiously.

    As for expanding into Los Angeles, I disagree that it is a dumb place to open Fresh & Easy stores. One can’t forget that “Los Angeles” includes places like Venice Beach, Santa Monoica, Bel Air, Beverly Hills, Brentwood, Pasadena…etc. L.A. (the birth-place of Erehwon vegetarian foods) has always been a great place for natural foods. They have Bristol Farms, the Farmer’s Market, Santa Monica’s street vendors once a week, and much more. People LOVE the Fresh & Easy concept in L.A. As for reaching “critical mass,” there is no group of people more likely to “do as other’s do” than those in Beverly Hills, Brentwood, Century City, Santa Monica, Venice, and West L.A. These are the beautiful people – lean, tan, fit, and looking for the next “fad” they can be the first to try.

    However – bottom line (and answer to the question asked in the original blog) – Tesco is smart to slow down right now, both because of the economy, and just to study their existing growth for success or problems that might emerge.


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