One year on, Fresh & Easy is struggling to lure shoppers

From Times staff writer Jerry Hirsch:

Like the redcoats of old, British retailing giant Tesco is learning that America is a big and difficult place to conquer.

Tesco’s Fresh & Easy Neighborhood Market chain of small grocery stores continues to struggle, Piper Jaffray senior analyst Mike Dennis said in a research report this week. There aren’t enough shoppers, and the ones that do come don’t buy very much, he said.

The chain, which is based in El Segundo, also is falling behind on store openings in California, Nevada and Arizona that are needed to leverage the huge investment the company has made in a distribution center and kitchen facility in Riverside, according to Dennis.

What’s more, nearly one year after opening its first U.S. stores, the retailer hasn’t established much brand recognition and has been forced to offer deeper-than-expected discounts to generate even sluggish store traffic.

"Poor locations and high value coupon discounts will not make them much profit," Dennis said. Fresh & Easy doesn’t accept product coupons but frequently offers $5 off of any purchase of $20 or more.

Dennis said his research shows that most Fresh & Easy shoppers limit their purchases to produce and a few other items. Sales of major brand-name items amount to only a fraction per store of what Ralphs, Vons, Stater Bros. and Albertsons garner, he said.

He predicted that Tesco’s woes would only worsen as major U.S. chains, including Safeway, Kroger, Wal-Mart, SuperValu and others, jump into the small-grocery-store format over the next couple of years.

The bottom line: Dennis believes Fresh & Easy needs a partner that better understands the U.S. market. He suggests that Tesco cut its losses by merging Fresh & Easy into a joint venture with an established American retailer with brand identity.

Tesco’s U.S.-traded shares hit a 52-week low on Thursday, falling 95 cents, or 4.6%, to $19.80. The stock peaked at $30.75 last October as the company began the U.S. rollout of Fresh & Easy.

Photo: A Fresh & Easy store in Manhattan Beach. Lawrence K. Ho  Los Angeles Times

Comments

[David]

Actually, Fresh and Easy has some great values and selection. I don't shop for everything there, but I go quite often. Funny thing is though, when they first opened up in my neighborhood, I didn't know what type of store it was. There was zero advertising prior and still little advertising letting people know who they are.

[Brad]

"Fresh" & "Easy" is neither.

Looking at the expiration dates on many of the products, you'd need to go every day or two and consume what you buy immediately. Nothing seems to have a shelf life of more than 48 hours.

Checking out is far, far from easy. I'm sorry but only offering self-serve checkout is a complete non-starter. I'm paying for the groceries -- they need to provide a full service checkout. It's not like there aren't enough employees lingering about, "can I help you?". Yeah, you can check out my order. Oh, and the last time I was there (Hollywood Blvd), I had issues applying the $5 off coupon. An associate came over and helped rescan the entire order. Later I found that I was charged 2x for the same items, with the second order $5 off. Hardly a bargain.

TJ's has nothing to worry about.

[sam]

I do think it's strange that they don't use checkers. The Tesco stores in England run very well with them, why wouldn't they use them here? Even their smaller Tesco Express stores in London have a couple checkers working all the time.

[Paul]

I've shopped at a Tesco. The selection is limited and the items are higher-end, which means they cost more. The freshly-prepared foods are comparable to those sold at Trader Joe's.

Fresh & Easies might do well in more affluent neighborhoods - but the store I went to in Huntington Beach was near apartment buildings and mobile homes and a lot of car dealers. It was also located near a 99 Cents Only store which saw much more traffic from those who are economically downsizing their shopping to dollar stores and Wal Marts.

I am afraid this is going to be another Linens & Things.

[Tom]

I shopped fresh and Easy in Las Vegas, and I had a concern, so I e-mailed the corp. offices in El Segundo to voice them, however I never heard back from Tesco in El Segundo. They could have at least e-mailed me a go to hell letter insead of not responing at all. I guess guess service is not a high priority.

[Hugo]

I absolutely love Fresh & Easy. They have excellent produce, they have excellent prepared foods with only fresh ingredients and none of the garbage preservatives. I'm disappointed to hear that F&E is having a harder time grabbing customers than is expected, but Tesco just needs to hang in there. F&E truly offers a product no one else does. The prices are soo reasonable that there's no need for coupons really. Most often they are cheaper than Vons or Ralphs, and even Food 4 Less (Kroger's bargain chain). I mean, I have always hated dealing with coupons anyway, why not just give us lower prices than surrounding businesses and be done with it? That's what F&E does, and the moment they open up the new store on Central & Adams in South LA, I will be a regular there. I can't stand the high prices for preservative-laden products at Ralphs. Ugh.

And as for the self-check out, I love them. I just wish they'd make the loading area bigger.

[Greg]

Actually, some of the F&E DO have full service checkouts, but most don't. The one in Anaheim on Lincoln is like a regular grocery store with check outs, as well as some self service, but the self service is limited to 15 or fewer items.

[Dan]

I think Fresh & Easy has good points and bad points. They have some interesting food items difficult to find elsewhere, such as iced tea with less sugar than normal. I've found their produce is indeed not always fresh. They have interesting refrigerated prepared foods, such as various rice and pasta dishes, but I think the OK sauces in these dishes are negated by poor quality chicken that has a very processed kind of texture and taste. I happen to like the self-checkout...I'd rather deal with a machine than an insincere person asking how my day is going. And their machines do a great job of scanning by the way. I commend Tesco for taking some chances and trying something new. No doubt they'll need to tweak the model, but the final outcome should be something that provides good value, a good shopping experience, and interesting and appealing food items. Like Trader Joe's, they are hard to categorize, but that didn't stop Trader Joe's from being successful, for the same three reasons I mentioned above. By the way, across the street from the new Fresh & Easy in Fountain Valley is a Famima, which is also a risky attempt at doing a convenience store differently, and they have some winning items, including very tasty Japanese/Asian style dishes as well as some decent Italian style pastas. I think 7-Eleven and Circle K could learn something from them about offering at least a few healthy items in their stores. Go innovators, we support your efforts!

[jimbob]

As a tesco worker in the UK. I am quite happy to hear that Fresh&Easy are not doing very well in the US. The American people seem to think that tesco are good to their workers in the UK. BUT THAT IS NOT THE TRUTH. Even though we have the chance to join a union here, there is not much point as the union just does what it is told to by tesco.
It is a regular happening in our shop that the prices on the shelves are wrong the vast majority of products have very short use by dates and in some cases the best by date has long since passed. I receive a 10% discount but it not made use of as I shop in Morrisons or Sainsburys where the prices are better than tescos.

[Paul Booth]

Great products, great staff. I always shop at my local Fresh and Easy.

[Dave Lane]

When I first went to a Fresh and Easy store here in Las Vegas I was impressed by both the low price and the excellent quality of the food. Being very into fitness, working lots of hours, and trying to eat right is very challenging and expensive especially with rising food prices however, F and E really does make it easy for me. The freshness date on all their products is a terrific idea and the quality of everything I've tried has honestly been excellent. The meat they sell is always top quality (even the burgers are always great!), the prepared foods are tasty (I even like their shephards pie), and there is always something on special so I find them to be a great value. I find that the stores are easy to use and that the price markdowns are even dependable (usually done at the same times daily and always 50% off or more). Don't laugh but I find myself going twice a day perusing for deals because I never know what dinner I can freeze next or chicken fruit salad I can snag for lunch- it only takes a minute or two to check it out!
Maybe F and E is a bit ahead of the curve but, afterall, what new business on that grandiose a scale EVER makes a killing in year one? You have to admit- Walmart, Ralphs, Albertsons, etc - the competition is fierce! They will catch on because they have quality products at affordable prices, have friendly staff in very convenient stores, and their size makes them easily adaptable to change which should keep them around for some time.

[anon626]

I shop here fairly often and while to food's expiration date isn't long, its perfect for a single person. As opposed to buying things in bulk like at Costco or something. The one in West Covina, has checkers in 2 of the lanes, the others are each person for themselves. It sux that they are struggling a bit but I think they definitely need more advertising, I didn't know they were open for a full year already and have yet to see a commercial on tv. but I will keep going. There prepared food is delish

[Annoyed shopper]

I refer to them as Fresh & Sleazy or Fresh & Difficult. I had been a TJ's shopper for years and was excited that I might have a second option for unique items. Upon my first trip to a brand new Fresh and Easy store, I came home and realized that many of the items I purchased were already expired. I made the assumption that maybe it was just a grand opening issue and that they were still working through inventory adjustments, so I decided to give them a second chance. I went back to the store a second time with my son and we were the only two shoppers in the whole store. They had more employees that customers. This is a rare occasion for someone that is used to shopping at TJ's where you can hardly move because there are so many people. Once again, on my second trip, more than 50% of the items I picked up were already out of date. The bagels I picked up had already expired two days earlier. I can't believe they were still on the shelf! And to top it all off they have the nerve to call themselves "Fresh". I wrote the corporate office and voiced my concerns, but like another comment from this forum, my email was never responded to. That was and will remain the last time I walk into one of their stores. There is nothing "Fresh" or "Easy" about shopping at this dump.

[Joe Krier]

I have been shopping at F&E for almost a year and most times I feel like i am stealing. With the $5.00 off coupons and the cheap prices I am amazed they can survive. I have come to rely almost exclusively on F&E and I sure hope they can make in the states. The store I frequent is in Spring Valley ( San Diego) and they usually have a good supply of organic produce and fresh juices

[anon]

I love F&E, love the fast U-scan, pricing is great, lower than the majors and equal to TJ's. Their own brands are really good..better than national brands in many cases. I find that the stamped date seems more like a sell by date than a use by date, most items last for a week after. I think a lot of these naysayers are union plants and TJ's loyalists, don't believe the hype one way or another and check the stores out for yourself. I know people who bought the union hype at first, now F&E is their #1 store.

[Susan]

I love shopping at Fresh and Easy. They have everything I need so I do my weekly shopping there and I don't shop anywhere else. I don't mind bagging my own groceries and I hope they keep offering their coupons, it helps a lot.
Their facilty is always clean and they have fresh foods at a very reasonable price. I recommend everyone go shopping there.

[martscan]

One of the greatest lessons I learned from Peter Lynch, aside from studying PE, debt to equity ratios, net cash per share, etc, etc. was to simply rate the company's product as to its appeal to me, personally. I checked out the store in Arcadia, didn't like my "sense" of it and predict they won't make it in the U.S. Definitely a short candidate on any technical rally.