Despite its name, Fresh & Easy has had a tough go of it.
The American branch of the British Tesco grocery chain reported losses every year since it opened in the United States in 2007. And when Fresh & Easy opens its first-ever convenience store-size space next week in Los Angeles, it will be trying to squeeze more customers out of an already tight market.
Most of the 177 Fresh & Easy stores in the United States take up about 10,000 square feet each, but on Nov. 2, Fresh & Easy will open a 3,000-square-foot express store at La Cienega Boulevard and 18th Street – the first of several planned for Southern California.
Fresh & Easy spokesman Brendan Wonnacott explained the move as a way to introduce the store into areas that lack the space for the chain’s traditional footprint.
“We’re doing a trial of the express format to see if it’s a concept that works,” Wonnacott said. “It’s a very visible location, and it’s a dense area where lots of folks are looking for more access to fresh food.”
He said Fresh & Easy express stores will have the same mix of products the standard stores have – some preprepared foods, some fresh produce and some frozen goods.
Fresh & Easy’s British parent company has already notched some successes with its Tesco Express.
“Tesco has many years experience in small food operations, running over 1,500 express stores in the United Kingdom and over 200 in Thailand,” Clive Black, an analyst who follows Tesco at Shore Capital in London, said in an e-mail. “More stores should support the efficiency of Fresh & Easy’s factories and build profits.”
Some say Southern California is a promising place to try out the express format.
“Convenience stores are driven by concentrated, fast-moving populations,” said Mark Lang, a professor of food marketing at St. Joseph’s University in Philadelphia. “Fresh & Easy is well-suited to that.”
But some others believe the express model will give shoppers fewer choices, and that’s a risky move for a struggling brand.
“Fresh & Easy is going to offer a similar range of products in a smaller format,” said David Bishop, a partner at retail marketing firm Balvor LCC in Chicago. “The consumer would find a more limited selection of items across the range of categories, and that will be challenging.”
Other stores’ success with the express model has been mixed. Minnesota-based grocery retailer Supervalu Inc. closed Urban Fresh, its small concept store in Chicago, in 2009 after little more than a year. Wal-Mart Stores Inc. opened four smaller Marketside stores in Arizona in 2008, but it shut them last week.
Not so easy
The Fresh & Easy chain has seemed plagued by bad luck and inopportune moves since coming to the United States.
Earlier this month, Gov. Jerry Brown signed AB 183, which outlaws the sale of alcohol at self-checkout stands – a measure that analysts expect will cause some problems for Fresh & Easy, which relies exclusively on self-checkouts.
While Tesco consistently posts profits, for the six-month period that ended Aug. 27, Fresh & Easy stores reported a loss of $113 million. That was narrower than the loss of $151 million for the same period last year, however.
One issue is that Fresh & Easy is somewhat of a Frankenstein grocer – a Trader Joe’s-size store that, like Trader Joe’s, sells private-label products and ready-to-eat items. But like Whole Foods, it also prides itself on healthy, natural goods. And like SuperValu’s Save-a-Lot and other discounters, it offers prices that appeal to value-seeking customers.
“Most of the successful retail food formats have decided to either focus on high-end quality or on offering the lowest prices on products,” said Balvor’s Bishop. “In the United States, the consumer doesn’t perceive that you can have high-quality products at the lowest prices.”
That has impeded Fresh & Easy’s ability to build a niche. It doesn’t help that the company has on occasion missed its demographic mark with its store locations, Lang said, building stores in lower-income areas when its core clientele is middle income.
Bishop said Fresh & Easy express locations should offer coffee and sandwiches, respectively, for morning and lunchtime customers while continuing to serve prepared dinnertime meals.
“They could expand the range of products that could satisfy broader needs throughout the day,” he said. “That’s in addition to what they have focused on, which is their combo prepared and fresh foods answering that age-old question: ‘What’s for dinner?’ ”
